Mar 102018
 
 March 10, 2018  Posted by at 11:26 am Finance Tagged with: , , , , , , , , , , ,  


Pablo Picasso The Roaster 1938

 

Trump Tariffs Cause Massive Outflows From US Stocks – BofAML (R.)
Trump-Kim Meeting Contingent On ‘Concrete Steps’ By North Korea (Ind.)
What’s Coming Will Be Much Worse Than 2008 (Phoenix)
313k Jobs Added? Nice Try But It’s Fake News (IRD)
QE Unwind Is Too Slow, Says Fed Governor, Thus Launching First Trial Balloon (WS)
Forget About ‘Free Trade’ (CHS)
Europe’s Most-Leveraged Stocks Surge (BBG)
Cash May Disappear in China – PBOC (BBG)
Canada, Ukraine and Fascism (Carley)
Letter To America – An Opportunity And A Warning (RTB) /span>
Xi Jinping Says China’s Political System Can Be A Model For The World (Qz)
Countries Annoyed Russia Gets All The Credit For 2016 Election Meddling (Onion)
A Warning Cry From the Doomsday Vault (BBG)
West Way Behind Iran, Saudi Arabia When It Comes To Women In Science (Qz)

 

 

Really? Both the Dow and the S&P were up 1.75% yesterday.

Trump Tariffs Cause Massive Outflows From US Stocks – BofAML (R.)

A marked shift toward protectionism by President Donald Trump caused sharp outflows from U.S. large-cap stocks this week, Bank of America Merrill-Lynch (BAML) strategists said on Friday. Investors rushed into government bonds and other safer assets amid rising fears of an international trade war after Trump’s plans for tariffs on imported steel and aluminum met barbed responses from allies and trade bodies. Overall, investors pulled money out of equities, though the damage was mostly in the United States where $10.3 billion flowed out of U.S. equity funds, while global equity funds suffered just $0.4 billion of outflows, according to EPFR data cited by BAML. “As QE ends, protectionism begins,” wrote BAML strategists.

The risk-off mood drove investors into money market funds, pushing assets up to $2.9 trillion – the highest level since 2010. Safe-haven gold also drew in $0.4 billion. U.S. small caps were sheltered from the storm, the only U.S. sector to draw inflows, albeit tiny at $0.03 billion. U.S. large-cap stocks lost $10.1 billion. Flows into Japanese equities continued apace, with the market drawing in $4.1 billion in its 14th straight week of inflows, the longest streak of inflows since 2013. European stock funds managed to draw in $0.1 billion. Trump’s exemption of Canada and Mexico from the final tariffs announced late on Thursday soothed investors somewhat, and news the U.S. president would meet with North Korean President Kim Jong Un caused crude prices to rise.

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How can Kim say no?

Trump-Kim Meeting Contingent On ‘Concrete Steps’ By North Korea (Ind.)

Vice President Mike Pence has said the US made “zero concessions” in order to get an invitation to meet North Korean leader Kim Jong-un and talk about a possible end to Pyongyang’s nuclear weapons programme. Mr Pence said that President Donald Trump has “consistently increased the pressure” on North Korea, which has continued the development of its weapons – including an increasing number of missile tests in the last 12 months – despite numerous resolutions by the United Nations. Later at the White House, the press secretary made it clear that talks would only take place if Washington saw “concrete action” by North Korea towards denuclearisation. Mr Trump and Mr Kim are expected to meet before the end of May, although a date and location has yet to be set.

After months of escalating rhetoric between the nations the prospect of a thaw has been welcomed by world leaders. Ms Sanders said at a briefing on Friday that President Trump was “in a great mood” in the wake of the announcement, saying that the US was having conversations “from a position of strength” – with denuclearisation having always been the goal of the administration. It has taken many by surprise, including US Secretary of State Rex Tillerson, who had said just hours before the announcement that the US was a “long ways from negotiations”. But, Mr Tillerson said the President made the decision to accept the invite “himself”, a move he said was a “dramatic” reversal in posture for North Korea.

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“When a stock bubble bursts, investors lose money. When a sovereign bond bubble bursts, entire countries go bust..”

What’s Coming Will Be Much Worse Than 2008 (Phoenix)

While everyone is “high fiving” over stocks holding up, the bond market is back to imploding. Already Treasury yields have bounced and are soaring higher in one of the nastiest breakouts in over 20 years.

In a world awash in too much debt (global Debt to GDP is over 300%) this is a MAJOR problem. Most investors believe that the 2008 Crisis was the worst crisis of their lifetimes. They’re mistaken… what’s coming down the pike when the Bond Bubble blows up will be many times worse than 2008. The reason is that bonds, not stocks, represent the bedrock of the financial system. When a stock bubble bursts, investors lose money. When a sovereign bond bubble bursts, entire countries go bust (a la Greece in 2010). On that note, I want to point out that bond yields are not just rising in the US… we’re seeing them spike in Germany, Japan, and others.

This is a truly global problem, and if Central Banks don’t move to get it control soon, we’re heading into a MAJOR crisis.

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US jobs reports are meaningless. Maybe it’s time to recognize that before they blow up in your faces.

313k Jobs Added? Nice Try But It’s Fake News (IRD)


The census bureau does the data-gathering and the Bureau of Labor Statistics feeds the questionable data sample through its statistical sausage grinder and spits out some type of grotesque scatological substance. You know an economic report is pure absurdity when the report exceeds Wall Street’s rose-colored estimate by 53%. That has to be, by far, an all-time record-high “beat.” If you sift through some of the foul-smelling data, it turns out 365k of the alleged jobs were part-time, which means the labor market lost 52k full-time jobs. But alas, I loathe paying any credence to complete fiction by dissecting the “let’s pretend” report. The numbers make no sense. Why? Because the alleged data does not fit the reality of the real economy.

Retail sales, auto sales, home sales and restaurant sales have been declining for the past couple of months. So who would be doing the hiring? Someone pointed out that Coinbase has hired 500 people. But the retail industry has been laying off thousands this year. Given the latest industrial production and auto sales numbers, I highly doubt factories are doing anything with their workforce except reducing it. And if the job market is “so strong,” how comes wages are flat? In fact, adjusted for real inflation, real wages are declining. If the job market was robust, wages would be soaring. Speaking of which, IF the labor market was what the Government wants us to believe it is, the FOMC would tripping all over itself to hike the Fed Funds rate. And the rate-hikes would be in chunks of 50-75 basis points – not the occasional 0.25% rise.

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Balloons in a bubble.

QE Unwind Is Too Slow, Says Fed Governor, Thus Launching First Trial Balloon (WS)

So we have the first Fed Governor and member of the policy-setting FOMC who came out and said that the QE Unwind that began last October with baby steps isn’t fast enough. And because it’s so slow it may actually contribute to, rather than lower, the “financial imbalances.” In her speech, Kansas City Fed President Esther George pointed at the growth of the economy, the tightness in the labor market, the additional support the economy will get from consumers and companies as they spend or invest the tax cuts, etc., etc. And despite this growth, “the stance of monetary policy remains quite accommodative,” she said. She cited the federal funds rate – the overnight interest rate the Fed targets. The Fed’s current target range is 1.25% to 1.50%, which is “well below estimates of its longer-run value of around 3%,” she said.

The Fed would have to raise rates at least six more times of 25 basis points each, for a total of at least 1.5 percentage points, to bring the federal funds rate to around 3% and get back to neutral. If the Fed wanted to actually tighten after that, it would have to raise rates further. So far, so good. And then came her concerns about the Fed’s balance sheet. Under QE, the Fed acquired $1.7 trillion in Treasury securities and $1.78 trillion in mortgage-backed securities, for a total of about $3.5 trillion. After QE ended in October 2014, the Fed then maintained the levels by replacing maturing securities. But in October last year, it commenced the QE-Unwind and started to not replace some maturing securities. This has the effect of shrinking its balance sheet.

Just like the Fed “tapered” QE by phasing it out over the course of a year, it is also ramping up the QE-Unwind over the course of a year. But the pace of the QE-Unwind has been too slow, according to George – and this may be destabilizing the financial markets: “By the end of this year, however, only about a quarter of the increase to the Fed’s balance sheet resulting from the first round of large scale asset purchases will be unwound. These holdings of longer-term assets were intended to put downward pressure on longer term interest rates. Many investors responded, as would be expected, by purchasing riskier assets in a reach for higher yield. As a result, asset prices may have become distorted relative to the economic fundamentals.”

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Free trade is a deception tool.

Forget About ‘Free Trade’ (CHS)

The mobility of capital radically alters the simplistic 18th century view of free trade. In today’s world, trade can not be coherently measured as goods moving between nations, because capital from the importing nation owns the productive assets in the exporting nation. If Apple owns a factory (or joint venture) in China and collects virtually all the profits from the iGadgets produced there, this reality cannot be captured by the models of simple trade described by Ricardo. In today’s globalized version of “free trade,” mobile capital can arbitrage labor, currencies, interest rates, regulatory burdens and political favors by shifting between nations and assets. Trying to account for trade in the 18th century manner of goods shipped between nations is nonsensical when components come from a number of nations and profits flow not to the nation of origin but to the owners of capital.

[..] In a world dominated by mobile capital, mobile capital is the comparative advantage. Mobile capital can borrow billions of dollars (or equivalent) in one nation at low rates of interest and then use that money to outbid domestic capital for assets in another nation with few sources of credit. Mobile capital can overwhelm the local political system, buying favors and cutting deals, all with cash borrowed at near-zero interest rates. Mobile capital can buy up and exploit resources and cheap labor until the resource is depleted or competition cuts profit margins. At that point, mobile capital closes the factories, fires the employees and moves on. Where is the “free trade” in a world in which the comparative advantage is held by mobile capital?

And what gives mobile capital its essentially unlimited leverage? Central banks issuing trillions of dollars in nearly-free money to banks and other financial institutions that funnel the free cash to corporations and financiers, who can then roam the world snapping up assets and arbitraging global imbalances with nearly-free money. There’s nothing remotely “free” about trade based not on Ricardo’s simple concept of comparative advantage but on capital flows unleashed by central bank liquidity. The gains reaped by mobile capital flow to those who control mobile capital: global corporations, financiers and banks. No wonder labor’s share of the economy is stagnating across the globe while corporate profits reach unprecedented heights.

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Until the last drop: “A lot of companies have been living off debt and their business model won’t apply to higher interest rates.”

Europe’s Most-Leveraged Stocks Surge (BBG)

Investors shrugged off trade skirmishes and signals of fading monetary stimulus as they rewarded some of Europe’s most leveraged companies, putting the latter on track for their best weekly advance since December 2016. Stocks with the weakest balance sheets gained 4.5% this week, compared to 3.1% for their less-indebted counterparts, according to a Bloomberg analysis of Morgan Stanley data. Since these risky-debt companies were beaten up earlier in the year, they’re beginning to bounce back thanks to the risk-on rally, buoyed by largely positive earnings reports, said Hugh Cuthbert at SVM Asset Management. “Post the jitters that we saw at the start of February, they are more than likely to be beneficiaries”.

“The market appetite for risk will always benefit those guys when it’s high.” Still, it’s a small reprieve after they dropped more than 10% in the 25 trading days through last week. Even after the recent advance, shares of weak balance-sheet companies sit 7.7% below their January peak. The Morgan Stanley-compiled basket tracks 40 European companies with measures that include net debt to Ebitda and interest coverage ratios. The good times may be short-lived, however, as the ECB pares stimulus, said Cuthbert. “Look out, if we are in a tightening cycle,” he said. “A lot of companies have been living off debt and their business model won’t apply to higher interest rates.”

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A control tool Beijing finds hard to resist. Predictably.

Cash May Disappear in China – PBOC (BBG)

Just because China’s financial regulators are cracking down on cryptocurrencies doesn’t mean they’re souring on the idea of digital money. People’s Bank of China Governor Zhou Xiaochuan made that clear at a press conference in Beijing on Friday, saying physical cash may one day become obsolete. Zhou said the PBOC is looking into digital currencies as it pursues faster, cheaper and more convenient payment methods, even as he warned that cryptocurrencies like Bitcoin – more often used for speculation than payments – don’t serve the economy.

“We must prevent major mistakes that would lead to irreparable losses, so we are cautious,” Zhou said during what may be one of his last public appearances before his expected retirement. “We don’t like creating products for speculation and making people have the illusion that they can get rich overnight.” China, once home to the world’s most active Bitcoin exchanges, banned the venues last year amid a broad-ranging clampdown on virtual currencies. Yet the country is still the world leader in digital payments, thanks to the popularity of platforms developed by tech giants Alibaba and Tencent.

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Ink black history.

Canada, Ukraine and Fascism (Carley)

The most notorious of the Nazi collaborators who immigrated to Canada was Mykhailo Chomiak, a mid-level Nazi operative in Poland, who came under US protection at the end of the war and eventually made his way to Canada where he settled in Alberta. Had he been captured by the Red Army, he would quite likely have been hanged for collaboration with the enemy. In Canada however he prospered as a farmer. His grand-daughter is the “Ukrainian-Canadian” Chrystia Freeland, the present minister for external affairs. She is a well-known Russophobe, persona non grata in the Russian Federation, who long claimed her grandfather was a “victim” of World War II. Her claims to this effect have been demonstrated to be untrue by the Australian born journalist John Helmer, amongst many others.

In 1940 the Liberal government facilitated the creation of the Canadian Ukrainian Congress (UCC), one of many organisations used to fight or marginalise the left in Canada, in this case amongst Canadian Ukrainians. The UCC is still around and appears to dominate the Ukrainian-Canadian community. Approximately 1.4 million people living in Canada claim full or partial Ukrainian descent though generally the latter. Most “Ukrainian-Canadians” were born in Canada; well more than half live in the western provinces. The vast majority has certainly never set foot in the Ukraine. It is this constituency on which the UCC depends to pursue its political agenda in Ottawa.

After the coup d’état in Kiev in February 2014 the UCC lobbied the then Conservative government under Stephen Harper to support the Ukrainian “regime change” operation which had been conducted by the United States and European Union. The UCC president, Paul Grod, took the lead in obtaining various advantages from the Harper government, including arms for the putschist regime in Kiev. It survives only through massive EU and US direct or indirect financial/political support and through armed backing from fascist militias who repress dissent by force and intimidation. Mr. Grod claims that Russia is pursuing a policy of “aggression” against the Ukraine.

If that were true, the putschists in Kiev would have long ago disappeared. The Harper government allowed fund raising for Pravyi Sektor, a Ukrainian fascist paramilitary group, through two organisations in Canada including the UCC, and even accorded “charitable status” to one of them to facilitate their fund raising and arms buying. Harper also sent military “advisors” to train Ukrainian forces, the backbone of which are fascist militias. The Trudeau government has continued that policy. “Canada should prepare for Russian attempts to destabilize its democracy,” according to Minister Freeland: “Ukraine is a very important partner to Canada and we will continue to support its efforts for democracy and economic growth.”

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“It is the US government and NATO, and the people who own and control them, who are the threats and the enemies to the future of Humanity.”

Letter To America – An Opportunity And A Warning (RTB) /span>

There is no place that the US or NATO has gone into in the last 4 decades that is better off. Not one. In fact, there is no place that NATO or the US have intervened, (usually against international law) that hasn’t become a failed state, hell on Earth for the citizens, and a genuine danger to the surrounding regions and the world. It is the US government and NATO, and the people who own and control them, who are the threats and the enemies to the future of Humanity. But their days of disregarding international law and destroying weaker nations with impunity are now over, as of March 1st, 2018. The good people of America now have a huge opportunity, and a huge challenge. Russia spends less than one tenth what the USA spends on military and defense, but their military and weapons are superior in every measurable way.

The waste, corruption and abject venality of the US military industrial complex has wasted trillions on weapon systems that are now literally useless, and which have left the US military (and by extension the American people) defenseless before the power of Russia’s weapons, which are designed and produced to be effective rather than profitable. The opportunity is this – the USA can now reduce its military spending (the highest in the world) by 90% and still be safer than you are right now, spending almost a trillion dollars a year on useless weapons and a defenseless military. Safer, because as soon as the American People take control of their government enough to reduce your spending to ONLY as much as Russia spends, Russia will stop having reason to see the USA as an existential threat.

The less you spend, the safer you will be. The more you spend, the more likely World War Three, which will see you as the instigators and the losers. This gives the USA, starting as soon as you want, an extra $800 billion, per year, to spend on things that have actual worth, things you really need. Health care, free college education, fixing the rotting economy and infrastructure that are daily becoming more of a threat to the American people than Russia has ever been. Your challenge is that you must root out an entrenched and ruthless kleptocracy, built on deceit and oppression, and which is bent on war, and will stop at nothing to cling to its power. It is a huge task, an historic task, but in it lies your only hope. These parasites must be stopped, and if the American People are not up to the challenge, if they fail in their historic mission, they will leave it to the armies of the world, led by Russia, who will no longer tolerate those who want to rule the world.

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So-called democracy is no better.

Xi Jinping Says China’s Political System Can Be A Model For The World (Qz)

Chinese president Xi Jinping has repeatedly told the world that China is ready to lead on issues like free trade and climate change. Now, he’s ready to extend his leadership to political parties everywhere. At the big annual gathering of Chinese lawmakers and political advisors that kicked off March 3, Xi said that China is offering a “new type of political party system”—a Chinese solution that contributes to the development of political parties around the world, according to state media (link in Chinese). The Chinese Communist Party (CCP) has always said the country will never copy the political systems of other countries, in particular the Western notion of democracy.

But under Xi—the most powerful Chinese leader in four decades—China’s own one-party system is one that is ready to be exported to regimes everywhere. The term “new type of political party system” was first put forward by Xi when he delivered a speech to non-party political advisors on March 4. It’s not the first time that Xi has floated the idea that China’s political model can make a contribution to the world. This time, however, Chinese state media churned out a wave of articles to underscore the significance of this new phrase. In the past, “some people lacking self-confidence always use Western political theories to criticize China’s political party system,” wrote Wang Xiaohong at the party-backed Central Institute of Socialism, in a commentary widely circulated by Chinese news outlets.

But as Wang argues, Western political systems are associated, among other things, with fractured societies, inefficient government, and “endless power transitions and social chaos” as in the countries of the former Soviet Union, and in north Africa after the Arab Spring. “The new type of political party system has overcome all sorts of problems that the old [one] can’t overcome,” Wang argued. In China, there are eight so-called “democratic parties” that are allowed to participate in the political system, but they are almost completely subservient to the CCP. Every year in March, members of the minor parties meet with their communist counterparts in Beijing to provide advice on everything from healthcare to poverty reduction—largely for show.

The system—called “multi-party cooperation and political consultation under the CCP’s leadership”—has been used as evidence that China is also a democracy. The internationalization of China’s political system is in fact well underway. Since 2014, the Communist Party has hosted an annual summit in Beijing inviting political party leaders from around the world to hear about how it governs China. In recent years, the party has also brought young African politicians to China for training, in a bid to cultivate allies.

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About as valuable as what ‘serious’ press has to report.

Countries Annoyed Russia Gets All The Credit For 2016 Election Meddling (Onion)

Complaining that U.S. investigations into foreign interference in the election have gotten almost everything wrong, officials from dozens of countries around the world expressed irritation Friday that all of the credit for meddling in the 2016 presidential race was going to Russia. Resentful operatives from Serbia, Uruguay, Swaziland, and 45 other nations said they were incredibly annoyed that Kremlin-backed computer hackers and dark-money financiers were receiving all the media attention, while their own far superior efforts to undermine the U.S. electoral process had so far received no recognition at all.

“Do you have any idea how much more sophisticated our attacks on American democracy were than Russia’s?” Laotian president Bounnhang Vorachith said of his government’s efforts to spread misinformation about Democratic candidate Hillary Clinton on social media sites. “We spent millions building a sophisticated bot network that could craft false but believable stories portraying Trump in a good light. And it worked! It’s unbelievably frustrating to pull off something like that and then have all the glory go to someone else.” “Do you really think Russia could’ve hacked into [Clinton campaign chairman] John Podesta’s emails?” Vorachith continued. “Hell no. That was Laos.”

According to sources, every time the American media credits Russian oligarchs with funding election-tampering efforts, numerous foreign agents across the globe throw up their arms and storm out of the room, infuriated because Costa Rican and Nepalese money launderers reportedly did far more to finance such initiatives. These agents have also been known to toss aside newspapers in anger, shouting that Mongolia’s work busing thousands of people with dead voters’ names to cast ballots for Clinton in New Hampshire was more deserving of attention than anything Russia had accomplished.

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A bit more attention might go a long way.

A Warning Cry From the Doomsday Vault (BBG)

On this winter day, the world was upside down: it was raining in the Arctic Circle and snowing in Rome. The contradiction was not lost on those gathered at the Svalbard Global Seed Vault, located near the top of the world. The scientists, activists, executives and government officials were in Longyearbyen, to mark the 10-year anniversary of what has become known as the Doomsday Vault, which stores seeds of the world’s most important crops deep in a mountain against the apocalyptic consequences of climate change and war. The challenge they’re facing now is that the climate is changing far quicker than they’d imagined. The facility sprung a leak last year after construction had failed to take into account that the permafrost could melt.

Norway is now spending about $20 million to secure and improve the facility. But it’s not just the building. “Biodiversity is the building block to develop new plants and because of climate change we’re in a terrible need to quickly develop new varieties,” said Aaslaug Marie Haga, executive director of Crop Trust, a group established to support gene banks. “The climate is changing quicker than the plants can handle.” Svalbard is the farthest north one can travel commercially, about an 1 1/2 hour flight from northern Norway. The vault is about a 10 minute drive from town, past a coal-fired power plant and up a winding two-lane road. Unless armed with a high-caliber rifle, driving is essential, since leaving town also means venturing into polar bear country.

The site’s entrance, not far from the abandoned coal mine that served as the first Nordic seed vault, shines at night like a green beacon, lit up by an artwork of fiber optics, steel and glass called Perpetual Repercussion. The seeds are kept at minus 18 centigrade (-4 Fahrenheit) more than 100 meters into the mountain behind six steel doors. And in an ideal world, the vault would never have to be used. It’s meant to back up the plant gene banks around the world, organized under the International Treaty on Plant Genetic Resources for Food and Agriculture. But many of these facilities are vulnerable. One withdrawal from Svalbard has already been made by the group that ran the seed bank in Aleppo, Syria.

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Math as a female field. Nice.

West Way Behind Iran, Saudi Arabia When It Comes To Women In Science (Qz)

In Iran, nearly 70% of university graduates in science, technology, engineering and mathematics (STEM) are women—a higher percentage than in any other country. Nearby Oman, Saudi Arabia, and the United Arab Emirates (UAE) are close, each boasting over 60% female graduates in science, still more of the rest of the world. Young women in science are the rule, not the exception, in the Middle East. At least a third of STEM trained talent across the Muslim world is female, writes Saadia Zahidi in her new book Fifty Million Rising, which tracks the workplace progress achieved by Muslim women since the turn of the century. Only in Jordan, Qatar and the UAE are girls more comfortable with math than boys.

“The Muslim world has put high investment in education, and the payoff is coming now,” argues Zahidi, a World Economic Forum executive who leads education and gender equality initiatives. While observant Muslim societies are often associated with strict social codes for men and women, Western gender stereotypes about work don’t necessarily apply: Several Muslim countries have filled more than half of STEM jobs with female workers. Zahidi adds that in many cases, Muslim women are pioneering their role in the workforce, so they don’t have preconceived stereotypes about whether tech jobs, for example, constitute “feminine” career goals.

A study published in February found that the social and political gender equality typical of Scandinavian countries may be inversely related to women’s representation in STEM fields. This could be in part due to the fact that countries with greater parity between sexes tend to be wealthier, providing better government support to citizens and allowing women to accept less secure jobs.

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Aug 312016
 
 August 31, 2016  Posted by at 8:58 am Finance Tagged with: , , , , , , , , , , , ,  


Esther Bubley Watching parade to recruit civilian defense volunteers, Washington DC 1943

The Central Pillar Of Global Order Is In Danger As TTIP Disintegrates (AEP)
The New TTIP? Meet TISA, ‘Secret Privatisation Pact’ (Ind.)
Debt, Deficits & Economic Warnings (Roberts)
The Academic Math of This Economy and The Long Run Consequences (Snider)
China Turmoil Looms As Traders Bet On Post-G-20 Yuan Tumble (ZH)
Chinese Banks Step Up Bad-Loan Write-Offs (WSJ)
China’s Biggest-Ever Metals Deal Snaps Up Cleveland’s Aleris (BBG)
Case Shiller Lags and Understates the Housing Bubble (Adler)
25 Email Questions Hillary Clinton Must Answer Under Oath By September 29 (SBA)
Could EU’s ‘Apple Tax’ Reboot Corporate Tax Reform In The US? (Forbes)
Bitcoin Was Brought Down By Its Own Potential – And The Banks (Qz)
The Dawn Of The Anthropocene (G.)
Greek Islands Raise Alarm Over Fast Increasing Refugee Arrivals (Kath.)
Counting The Lost And Nameless Dead Of The Mediterranean (SMH)

 

 

Another wonderful Ambrose dramatic exeggaration.

Central Pillar Of Global Order In Danger Of Collapse As TTIP Disintegrates (AEP)

The Transatlantic pact intended to unite Europe and North America in a vast free trade zone is close to collapse after France called for a complete suspension of talks, accusing the US of blocking any workable compromise. “Political support in France for these negotiations no longer exists,” said Matthias Fekl, the French commerce secretary. Mr Fekl said his country would request a formal decision by EU ministers at a summit in Bratislava to drop the hotly-contested deal, known as the Transatlantic Trade and Investment Partnership (TTIP). “The Americans are offering nothing, or just crumbs. That is not how allies should negotiate. There must be a clear and definite halt to these talks, to restart them later on a proper basis,” he said.

The project is infinitely more than a trade deal. It is part of a strategic push to bind together the two halves of North Atlantic civilisation at a dangerous moment when the Western liberal order is under threat. The two sides are currently drifting towards divorce. “TTIP was supposed to set the rules for the global trade,” said Rem Korteweg, a trade expert at the Centre for European Reform. “It was to be a central pillar of an alliance of like-minded countries. If it all falls apart in acrimony, what kind of global governance are we going to have?” he said. Mr Fekl’s hard-line comments were echoed in slightly softer language by French president François Hollande, who said on Tuesday that there was no chance of a deal on TTIP before the next administration takes power in Washington.

“The talks have become bogged down, the positions have not been respected, and the imbalance is obvious. It is better that we face up to this candidly rather than prolong a discussion on foundations that cannot succeed,” he said.

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There’s a lot more to get rid of.

The New TTIP? Meet TISA, ‘Secret Privatisation Pact’ (Ind.)

An international trade deal being negotiated in secret is a “turbo-charged privatisation pact” that poses a threat to democratic sovereignty and “the very concept of public services”, campaigners have warned. But this is not TTIP – the international agreement it appears campaigners in the European Union have managed to scupper over similar concerns – this is TISA, a deal backed by some of the world’s biggest corporations, such as Microsoft, Google, IBM, Walt Disney, Walmart, Citigroup and JP Morgan Chase. Few people may have heard of the Trade In Services Agreement, but campaign group Global Justice Now warns in a new report: “Defeating TTIP may amount to a pyrrhic victory if we allow TISA to pass without challenge.” Like the Transatlantic Trade and Investment Partnership, TISA is being negotiated in secret, even though it could have a major impact on countries which sign up.

While TTIP is only between the EU and US, those behind TISA have global ambitions as it involves most of the world’s major economies – with the notable exceptions of China and Russia – in a group they call the “Really Good Friends of Services”. The Department for International Trade dismissed the idea that public services were at risk from TISA, adding that the UK was committed to securing an “ambitious” deal. But according to Global Justice Now’s report, the deal could “lock in privatisation of public services”; allow “casino capitalism” by undermining financial regulations designed to prevent a recurrence of the 2008 recession; threaten online privacy; damage efforts to fight climate change; and prevent developing countries from improving public services.

Nick Dearden, director of group, said: “This deal is a threat to the very concept of public services. It is a turbo-charged privatisation pact, based on the idea that rather than serving the public interest, governments must step out of the way and allow corporations to ‘get on with it’. “Of particular concern, we fear TISA will include clauses that will prevent governments taking public control of strategic services, and inhibit regulation of the very banks that created the financial crash.” He suggested pro-Brexit voters should be concerned at the potential loss of sovereignty. “Many people were persuaded to leave the EU on the grounds they would be ‘taking back control’ of our economic policy,” Mr Dearden said. “But if we sign up to TISA, our ability to control our economy – to regulate, to protect public services, to fight climate change – is massively reduced. In effect, we would be handing large swathes of policy-making to big business. “

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Growth based on debt reduces productive investment.

Debt, Deficits & Economic Warnings (Roberts)

By increasing taxes, to generate additional revenue for the government, you decrease the available capital that could be used for productive investments. Since the government doesn’t want factories, office buildings, or oil wells, but rather cash, this forces the liquidation of productive investments thereby reducing capacity for economic growth. The current Administration is failing once again to recognize the problems that exist with this country, at this moment, does not lie with the “rich.” Instead, the problem is a lack of ability for consumers to maintain a standard of living that is well beyond their earnings capability. While the two most recent Administrations have been heavily criticized for running burgeoning deficits – the reality is that the average American has been doing the same for the past thirty years.

[..] as the “rich” invest in productive investments it leads to higher employment, strong consumer demand and economic growth. In turn, this leads to higher tax revenue. “However, deficits, and deficit spending, are HIGHLY destructive to economic growth as it directly impacts gross receipts and saved capital equally. Like cancer – running deficits, along with continued deficit spending, continues to destroy saved capital and damages capital formation.” Debt is, by its very nature, a cancer on economic growth. As debt levels rise it consumes more capital by diverting it from productive investments into debt service. As debt levels spread through the system it consumes greater amounts of capital until it eventually kills the host. The chart below shows the rise of federal debt and its impact on economic growth.

The reality is that the majority of the aggregate growth in the economy since 1980 has been financed by deficit spending, credit creation and a reduction in savings. This reduced productive investment in the economy and the output of the economy slowed. As the economy slowed, and wages fell, the consumer was forced to take on more leverage to maintain their standard of living which in turn decreased savings. As a result of the increased leverage more of their income was needed to service the debt – and with that the “debt cancer” engulfed the system.

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Excellent from Jeffrey Snider.

The Academic Math of This Economy and The Long Run Consequences (Snider)

[..] the continued and “unexpected” lack of recovery after nine years of failure in monetary policy is forcing the math to recognize what is obvious in non-mathematical terms. No regressions are at all necessary to conclude that the bond market has, in fact, made sense this whole time and that it is economists who have no idea what is going on or why. By the mathematics of 2011, real GDP “should be” $19.3 trillion in Q2 2016; it was instead just $16.6 trillion after the third straight quarter near 1%. To the academics, “gloom” is irrational and thus requires translation into math to become somehow backwards explanatory for why the economy that “should be” isn’t.

In the actual economy, “gloom” is properly called reality. In this world, people know all-too-well that jobs disappeared during and after the Great Recession and never came back. No amount of asset price manipulation can possibly make up that difference. Economists try to convince everyone but really themselves that it didn’t matter when it is this very math that proves yet again it did; in fact, the true state of labor beyond the unemployment rate and Establishment Survey is all that matters.

The math of potential and even gloom is just the frustratingly late catch-up forcing economists to come to terms with the fact they have been all wrong about all of this all along. You need no PhD to so easily understand that you just cannot substitute jobs with debt; doing so is economic suicide. At some point over the long run you must come to terms with that discrepancy. This math is finally welcoming economists to that long run, a place their patron saint, Keynes, said didn’t exist. It really does as the math has been recalculated far more toward the “impossible” [..]

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Yikes graphs. A G-20 that might actually count for something.

China Turmoil Looms As Traders Bet On Post-G-20 Yuan Tumble (ZH)

Something is different this time. For the last few years, China has ‘ensured stability’ in the Yuan ahead of major geopolitical events – no matter what – only to let things slide back into turmoiling after. Ahead of this weekend’s G-20, however, and amid notably deteriorating fundamentals (and an increasingly hawkish-sounding Fed), China has let the Yuan tumble in the last week… and traders are piling into bets on post-G-20 weakness to continue. As Bloomberg notes, history shows that the Chinese currency usually strengthens ahead of major political or economic events, such as President Xi Jinping’s state visits to the U.S. and the Boao Forum.

But this time – ahead of the G-20 gathering – onshore Yuan is being allowed to weaken… back near post-Brexit lows…

Perhaps as another warning to The Fed? But as Bloomberg reports, derivative markets are pointing to renewed bets on yuan depreciation, with a measure of expected price swings poised for the biggest monthly increase since January.

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Not even the same ballpark. “The IMF estimates China’s nonperforming-loan ratio at 15%, compared with the official 1.75% figure..”

Chinese Banks Step Up Bad-Loan Write-Offs (WSJ)

China’s largest banks are writing off huge volumes of soured loans in an effort to clean up their balance sheets, as they look to improve their future profitability despite the country’s economic slowdown. The country’s top four banks collectively wrote off 130.3 billion yuan ($19.5 billion) of bad loans in the first half of 2016, 44% more than in the same period a year earlier. The clear-out has helped banks in one sense: Overall, their nonperforming loans as a proportion of their lending book were unchanged at the close of the second quarter from the end of March, the first quarter since mid-2013 that the key metric hasn’t increased.

But the write-offs have come as a number of other challenges beset Chinese banks. New loans are shriveling—nearly all in July went to mortgages. A series of interest-rate cuts by the central bank since 2012 have squeezed banks’ earnings. And a plan by Beijing to let companies allot their equity to banks in exchange for loan forgiveness is likely to saddle lenders with more dubious assets in coming months, bankers and analysts say. The IMF estimates China’s nonperforming-loan ratio at 15%, compared with the official 1.75% figure reported by the government, because of differences in the way bad loans are recognized.

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Buying know-how.

China’s Biggest-Ever Metals Deal Snaps Up Cleveland’s Aleris (BBG)

China’s influence in global metals markets just stepped up a gear after the owner of its top supplier of aluminum products agreed to buy Aleris of the U.S. for $2.3 billion, marking the nation’s biggest-ever overseas purchase of a metals processor.
The purchase of the Cleveland, Ohio-based company by Zhongwang USA, owned by Liu Zhongtian, founder and chairman of China Zhongwang, will open up new markets for the Chinese company among aerospace and automotive companies. Monday’s deal underscores China’s shift to higher value-added products and will give Zhongwang access to technological know-how and more demanding customers, said Paul Adkins, managing director of Beijing-based aluminum consultancy AZ China.

“Aleris supplies the Boeings and the big carmakers of this world – very advanced consumers,” Adkins said by phone on Tuesday. “Buying it has to provide some sort of opportunity for Zhongwang to bring that know-how back to China. When you’ve got more than half of the world’s primary aluminum supply in China, there is a natural momentum for China to pull other parts of the supply chain into its orbit.” China Zhongwang is Asia’s biggest producer of extruded aluminum, and already has ambitions to sell aluminum sheet to China’s emerging auto and aerospace industries. It’s due this year to start up a flat-rolled aluminum plant in Tianjin, near Beijing, which will supply products that China still has to import.

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Not an entirely new criticism, but good to point out from time to time.

Case Shiller Lags and Understates the Housing Bubble (Adler)

Here’s how the Case Shiller Index (CSI) press release spun the data on the state of the US single family housing market today: “The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in June, unchanged from last month. The 10-City Composite posted a 4.3% annual increase, down from 4.4% the previous month.The 20-City Composite reported a year-over-year gain of 5.1%, down from 5.3% in May.” The problem is that Case Shiller’s methodology causes price suppression and severe lag. That gives the impression that the US housing market isn’t in a bubble. It’s a misimpression, considering that market prices on average are actually above the 2006 bubble peak.

If 2006 was the top of the most extreme bubble in US history, what does that make today’s higher prices? Case Shiller uses only public record data. The current release, which purports to be June data, is really data culled from government records for recorded sales. The closings were purportedly in June, but the contracts were entered at least a month before, and in most cases 2 months to 3 months prior. So the current CSI release doesn’t represent the current market. In fact, the lag is even greater than that. Case Shiller doesn’t merely use only the most recent month’s data, as you would think. It uses that month and the two prior months, so that effectively it represents average recorded closed sale prices for the 3 months of April May and June. It’s the average price as of the time midpoint of the period, in this case mid May.

Add the typical 45-60 day closing and the current data represents contracts signed in mid to late March. It is now almost September. The Case Shiller data is from 5 months ago. The housing market normally moves in very stable trends over years, if not decades, until there’s a crash. This lag factor isn’t too critical for those buying homes for their families to live in. It’s a little more critical for stock market traders and investors, because at major turning points, misleading data can lead to costly investing mistakes. For traders, using the Case Shiller data would be like making decisions based on where the 3 month moving average of the S&P 500 back in late March. Who would do that when current market prices are available?

It’s the same for the housing market. We have near current data on contract prices from both the NAR, and from the online Realtor firm, Redfin. The NAR compiles the MLS data on contract prices from the entire US and releases it within 30 days of the end of the previous month. Redfin compiles sales from 30 large US metros. So whereas Case Shiller is giving us a smoothed average price as of March, we have current actual prices as of July from both the NAR and Redfin. Apply a little technical analysis to that data, and we can see the state of the housing market as of last month, not 5 months ago. It has actually accelerated a bit this year relative to the prior 12 months. And it’s definitely at a new high versus the last bubble.

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No space for the whole list. Useful read though.

25 Email Questions Hillary Clinton Must Answer Under Oath By September 29 (SBA)

Judicial Watch today announced it submitted questions to former Secretary of State Hillary Clinton concerning her email practices. Clinton’s answers, under oath, are due on September 29. On August 19, U.S. District Court Judge Emmet G. Sullivan granted Judicial Watch further discovery on the Clinton email matter and ordered Clinton to answer the questions “by no later than thirty days thereafter….” Under federal court rules, Judicial Watch is limited to twenty-five questions. The questions are:

1) Describe the creation of the clintonemail.com system, including who decided to create the system, the date it was decided to create the system, why it was created, who set it up, and when it became operational.

2) Describe the creation of your clintonemail.com email account, including who decided to create it, when it was created, why it was created, and, if you did not set up the account yourself, who set it up for you.

3) When did you decide to use a clintonemail.com email account to conduct official State Department business and whom did you consult in making this decision?

4) Identify all communications in which you participated concerning or relating to your decision to use a clintonemail.com email account to conduct official State Department business and, for each communication, identify the time, date, place, manner (e.g., in person, in writing, by telephone, or by electronic or other means), persons present or participating, and content of the communication.

5) In a 60 Minutes interview aired on July 24, 2016, you stated that it was “recommended” you use a personal email account to conduct official State Department business. What recommendations were you given about using or not using a personal email account to conduct official State Department business, who made any such recommendations, and when were any such recommendations made?

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Corporations have too much political power to let that happen.

Could EU’s ‘Apple Tax’ Reboot Corporate Tax Reform In The US? (Forbes)

For years, corporate tax reform in the U.S. has been dead in the water, in part because of deep disagreements within the American business community over what such a restructuring should look like. But the European Union’s increasingly aggressive effort to force its members to collect tax on U.S.-based multinationals has the potential to change that dynamic. The EU’s push has resulted in a series of major initiatives, none bigger than its decision to order Ireland to collect a stunning $14.5 billion in back taxes from Apple. That ruling has generated a swift backlash from the U.S. high-tech industry, U.S. policymakers across the political spectrum, and from Ireland itself. Yet, for all the howling, it might open the door for long-awaited tax reform in the United States.

To understand why, think about two kinds of U.S. corporations—those that pay lots of taxes and those that pay little or none. Some—especially companies whose business is built on intellectual property—have structured themselves in a way that sharply reduces their worldwide taxes. They shift income to related firms located in low-tax or no-tax countries while allocating interest costs and other expenses to the high-rate U.S. The result: Many pay effective tax rates in the single digits. At the same time, firms such as retailers, without the ability to shift income to low-tax countries, pay quite high effective tax rates. That split hamstrings the debate over corporate tax reform, especially the version that would eliminate tax preferences in exchange for a lower corporate rate.

If you are already paying close to the top statutory rate of 35%, you love that swap. After all, you are paying a high effective rate because those tax preferences are not helping you, so why not support legislation to ditch them in exchange for a lower rate? But for low-tax firms, the political calculation is dramatically different. If tax preferences make it possible for you to pay an effective rate of 10%, why would you give them up in return for a new U.S. statutory rate of 28%, or even 25%? How do you explain to your shareholders why more than doubling your rate is a good thing?

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Too many doubts.

Bitcoin Was Brought Down By Its Own Potential – And The Banks (Qz)

The best that can be said about Bitcoin right now is that it still exists. Split by internal divisions while its most useful aspects are harvested by the very financial behemoths it once hoped to destroy, Bitcoin is fast becoming the tech world’s version of Waiting for Godot, wherein a hermetically sealed community squabbles and bickers over arcane points of code and law as their world slowly crumbles around them. In the last 12 months, attempts made to produce a road map for the cryptocurrency’s future have come to naught, all while core developers abandon the project and opaque Chinese mining concerns wield outlandish power. Welcome to today’s Bitcoin—a phenomenon so internally focused that its advocates have barely noticed the battle has already been lost.

Back at its inception, the conversation around the currency was driven by an almost unconscionable optimism. This wasn’t simply a mechanism for the easy transfer of capital: This was a tool by which the entire international financial system could be made anew, with corrupt central banks, inflationary currencies, and immoral stockbrokers consigned to the dustbin of history. In a world still reeling from the chaos of the global financial crisis, Bitcoin seemed less like a currency and more like a way of future-proofing the global economy from ever having to deal with something so awful again.

The Bitcoin boom of late 2013 brought greater mainstream attention to the cryptocurrency. Bitcoin’s value surged from $200 to $1,200 over the space of a few weeks, temporarily rendering it more valuable than gold. This was to be a short-lived state of affairs, however, as a string of scandals, hacks, exchange collapses, and—dare I say it—common sense brought the price of Bitcoin plummeting back to Earth. Cue three years of stagnation and false promise, as Bitcoin has struggled to prove its use for, well … anything, really. Even after all this time, Bitcoin is still an economy driven almost entirely by potential—by the dream that, one day soon, Bitcoin will become the lingua franca of the global economic order.

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“One criticism of the Anthropocene as geology is that it is very short,” said Zalasiewicz. “Our response is that many of the changes are irreversible.”

The Dawn Of The Anthropocene (G.)

Humanity’s impact on the Earth is now so profound that a new geological epoch – the Anthropocene – needs to be declared, according to an official expert group who presented the recommendation to the International Geological Congress in Cape Town on Monday. The new epoch should begin about 1950, the experts said, and was likely to be defined by the radioactive elements dispersed across the planet by nuclear bomb tests, although an array of other signals, including plastic pollution, soot from power stations, concrete, and even the bones left by the global proliferation of the domestic chicken were now under consideration. The current epoch, the Holocene, is the 12,000 years of stable climate since the last ice age during which all human civilisation developed.

But the striking acceleration since the mid-20th century of carbon dioxide emissions and sea level rise, the global mass extinction of species, and the transformation of land by deforestation and development mark the end of that slice of geological time, the experts argue. The Earth is so profoundly changed that the Holocene must give way to the Anthropocene. “The significance of the Anthropocene is that it sets a different trajectory for the Earth system, of which we of course are part,” said Prof Jan Zalasiewicz, a geologist at the University of Leicester and chair of the Working Group on the Anthropocene (WGA), which started work in 2009. “If our recommendation is accepted, the Anthropocene will have started just a little before I was born,” he said. “We have lived most of our lives in something called the Anthropocene and are just realising the scale and permanence of the change.”

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“The number of migrants on Lesvos has reached 5,226 while existing camps are only designed to host 3,500. The situation on Chios is equally disheartening, with 3,309 migrants in accommodation for 1,100.”

Greek Islands Raise Alarm Over Fast Increasing Refugee Arrivals (Kath.)

Local and port authorities on the islands of the eastern Aegean are demanding immediate government action to decongest overcrowded migrant camps, insisting that they cannot cope with the recent surge in arrivals from neighboring Turkey. In a letter addressed to Shipping and Island Policy Minister Theodoros Dritsas, the Lesvos Port Authority raised the alarm, saying the island simply does not have the available infrastructure to accommodate the increased flows. The number of migrants on Lesvos has reached 5,226 while existing camps are only designed to host 3,500. The situation on Chios is equally disheartening, with 3,309 migrants in accommodation for 1,100.

According to the latest data, there are 12,120 migrants on the islands. A March deal between the European Union and Turkey to stem the flow managed to limit monthly arrivals to just a few thousand. However, the figure rose to its highest in four months in August. While Interior Ministry officials have attributed the overcrowded conditions at the camps to delays in the registration process, some critics have interpreted the increased traffic as a form of pressure from Ankara, which has linked the deal’s implementation to visa-free travel for its citizens within the EU.

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“There are still an estimated 277,000 migrants in Libya, as well as 348,000 internally displaced people and 310,000 returnees..”

Counting The Lost And Nameless Dead Of The Mediterranean (SMH)

The central Mediterranean is by far the most dangerous crossing into Europe for migrants. On Monday alone, 6908 migrants were rescued in the Channel of Sicily in 35 rescue operations, pulling them from 44 rubber dinghies, eight small wooden boats and two bigger fishing boats. The surge came after a week of windy and rough conditions had kept would-be migrants on the shores of Libya. Two people were reported to have died. There has also been a surge this week in the number of migrants arriving on Greek islands, where on average 100 people come ashore each day.

Of the 3165 people who have died or went missing this year crossing the sea (as of August 28), 2725 were attempting the passage to Italy from North Africa, according to the International Organization for Migration’s figures. More people died on this route than last year in the same period. [..] As of August 28, 272,070 migrants had crossed the Mediterranean into Europe in 2016. Just under half of the arrivals, or 106,461 (as of August 24) arrived in Italy. There, most arrivals came from Nigeria, Eritrea and Gambia. There are still an estimated 277,000 migrants in Libya, as well as 348,000 internally displaced people and 310,000 returnees – refugees returned from abroad.

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Sep 052015
 
 September 5, 2015  Posted by at 11:22 am Finance Tagged with: , , , , , , , , , ,  


Russell Lee Saloon, Craigville, Minnesota Aug 1937

US Stocks End Sharply Lower After Jobs Report (MarketWatch)
China’s Central Banker Says His Nation’s Bubble ‘Burst’ (Bloomberg)
100% Risk Of A 50% Stock Crash (Paul B. Farrell)
The Bible Is Clear: Let The Refugees In, Every Last One (Guardian)
UK Must Emulate Kindertransport To Aid Refugee Crisis: Lord Sacks (Guardian)
Grant Visas To Refugees Before They Take The Death Route (ThePressProject)
The March of Shame (Irate Greek)
Migrants Stream Into Austria, Swept West By Overwhelmed Hungary (Reuters)
Over 1,000 Exhausted Migrants Reach Austria Border (AP)
Hungary Provides 100 Buses To Take Refugees To Austrian Border (WaPo)
This Refugee Crisis Is Too Big For Europe’s Broken Institutions (Paul Mason)
European Union Cracking Under Pressure Of Migrant Crisis (Globe and Mail)
The Poisoned Chalice (James Galbraith And J. Luis Martin)
On CNBC Discussing Greece And Europe – Full Transcript (Varoufakis)
You Never Want a Serious Crisis to go to Waste (Legrain)
Capital Outflow From China Adds Another Layer Of Worry (MarketWatch)
Canada, Australia Feel Squeeze In Wake Of Chinese Economic Slowdown (Guardian)
South Korean Exports Fall 14.7%, GDP Forecasts Cut (WSJ)
Scientists Find Mathematical Secret To How Nature Works (WaPo)

Not in labor force is the only number rising strongly.

US Stocks End Sharply Lower After Jobs Report (MarketWatch)

U.S. stocks ended Friday’s session sharply lower, as a highly anticipated monthly jobs report intensified the debate about the Federal Reserve’s decision to raise interest rates in September. Widely seen as the last notable economic report before the Federal Reserve decides whether to raise interest rates at its two-day meeting on Sept. 16-17, the jobs data showed that the U.S. economy added a weaker-than-estimated 173,000 nonfarm jobs last month, while the unemployment rate dropped to 5.1%—marking its lowest level since April 2008.

The employment report began a downbeat day for the market as investors seemed to read the data as signaling that the Fed may soon decide to end its ultraloose monetary policy in two weeks. “The Fed has been clear about wanting to raise rates this year and at least now they have a green light if they decide to do so,” said Kate Warne, investment strategist at Edward Jones. Friday’s losses capped another brutal week for the main indexes, which suffered their second-largest weekly losses this year.

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That sounds clear enough.

China’s Central Banker Says His Nation’s Bubble ‘Burst’ (Bloomberg)

Zhou Xiaochuan, governor of China’s central bank, couldn’t stop repeating to a G-20 gathering that a bubble in his country had “burst.” It came up about three times in his explanation Friday of what is going on with China’s stock market, according to a Japanese finance ministry official. When asked by a reporter if Zhou was talking about a bubble, Japanese Finance Minister Taro Aso was unequivocal: “What else bursts?” A dissection of the slowdown of the world’s second-largest economy and talk about the equity rout which erased $5 trillion of value was a focal point at the meeting of global policy makers in Ankara. That wasn’t enough for Aso, who said that the discussions hadn’t been constructive.

Chinese stocks have plunged almost 40 percent since a June peak, triggering unprecedented intervention from the authorities. The central bank cut rates for the fifth time since November last month and lowered the amount of cash banks must set aside, falling back on its major levers to support equity prices and the slowing economy. It was China, rather than the timing of an interest-rate increase by the Federal Reserve, that dominated the discussion, according to the Japanese official, with many people commenting that China’s sluggish economic performance is a risk to the global economy and especially to emerging-market nations.

“It’s clear there are problems in the Chinese market, and at today’s G-20 meeting, many people other than myself also expressed that opinion,” Aso said after a meeting of finance chiefs and central bank governors. The PBOC shocked global markets by allowing the biggest yuan depreciation in two decades on Aug. 11, when it changed the exchange-rate mechanism to give markets a bigger role in setting the currency’s level. That historic move would not get a mention in the communique, according to the Japanese official, who asked not to be named, citing ministry policy.

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After the election.

100% Risk Of A 50% Stock Crash (Paul B. Farrell)

“Who will get the Dreary Recovery Going?” taunts Mort Zuckerman in a Wall Street Journal op-ed. The head of U.S. News & World Report warns America that a recession is coming: “They occur about every eight years and America is ill-prepared to weather the one on the horizon.” Ill-equipped. Yes, the clock is ticking, every 8 years. 2000. 2008. Next 2016, even with a President Trump. Another great newsman, Bill O’Neill, publisher of Investors Business Daily, author of perennial best-seller “How To Make Money in Stocks,” agrees: Markets have peaked and crashed roughly every four years for the last century, with bigger crashes, long recessions, every eight years. And still most investors will be ill-prepared.

Sounds like a double-teamed confirmation of Jeremy Grantham’s famous BusinessInsider prediction for 2016: “Around the presidential election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse.” Get it? A mega crash is coming, dropping half off its peak, down below Dow 5,000. Not just another 1,000-point correction like last month. But a heart-stopping collapse coinciding with the 2016 elections … then a long systemic recession … probably lasting till the 2020 presidential election, maybe longer … no matter who’s in the White House, Doanld Trump, Jeb Bush or Hillary Clinton.

Yes, recessions hit every eight years. The last was just about 8 years ago, warned Zuckerman with these facts: “The period since the Great Recession ended in 2009 has seen the weakest U.S. recovery since World War II,” Our aging bull is actually warning us … recession dead ahead.

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Jesus was a refugee.

The Bible Is Clear: Let The Refugees In, Every Last One (Guardian)

Thousands more, says David Cameron now, grudgingly conceding to popular pressure. But why not all of them? Surely that’s the biblical answer to the “how many can we take?” question. Every single last one. Let’s dig up the greenbelt, create new cities, turn our Downton Abbeys into flats and church halls into temporary dormitories, and reclaim all those empty penthouses being used as nothing more than investment vehicles. Yes, it may change the character of this country. Or maybe it won’t require anything like such drastic action – who knows? But let’s do whatever it takes to open the door of welcome. “Keep, ancient lands, your storied pomp! Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!”

And yes, when Emma Lazarus wrote these words – later inscribed on the Statue of Liberty – by “storied pomp”, she meant us Brits. For years our politicians have piggy-backed upon Christian morality for electoral advantage. We should “feel proud that this is a Christian country”, said Cameron earlier this year (pre-election, of course), in what some might uncharitably see as a call to maintain a Muslim-free view from his Cotswold village. But there is no respectable Christian argument for fortress Europe, surrounded by a new iron curtain of razor wire to keep poor, dark-skinned people out. Indeed, the moral framework that our prime minister so frequently references – and to which he claims some sort of vague allegiance – is crystal clear about the absolute priority of our obligation to refugees.

For the moral imagination of the Hebrew scriptures was determined by a battered refugee people, fleeing political oppression in north Africa, and seeking a new life for themselves safe from violence and poverty. Time and again, the books of the Hebrew scriptures remind its readers not to forget that they too were once in this situation and their ethics must be structured around practical help driven by fellow-feeling. The Passover, first celebrated as a last-minute preparation before leaving Egypt (unleavened bread as there wasn’t time for it to rise) – and the Christian Eucharist that was built on top of it – is nothing less than a call to re-live this basic human solidarity in the face of existential fear and uncertainty. And when the author of Matthew’s gospel describes Jesus as a child refugee, fleeing his country from a despotic ruler intent on taking his life – Herod not Assad – he is deliberately sampling that basic foundational myth of the Exodus.

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If not Jesus, would the Holocaust do it?

UK Must Emulate Kindertransport To Aid Refugee Crisis: Lord Sacks (Guardian)

Britain needs to make a bold gesture similar to Kindertransport to help address the humanitarian crisis engulfing Europe, the former chief rabbi has said. Lord Sacks said it was time for human compassion to triumph in the same way as the scheme that saved thousands of Jewish children before the second world war broke out. He said that a “very clear and conspicuous humanitarian gesture, like Kindertransport” would help to achieve that aim. “Europe is being tested as it has not been tested since the second world war … The European Union was created as a way of saying that we recognise human rights, after the catastrophe of two world wars and the Holocaust, and it’s very chilling to see some of these scenarios being re-enacted,” Sacks told BBC2’s Newsnight on Thursday.

He believes that the UK could accommodate 10,000 displaced people: “It’s a figure to which Britain would respond. The churches, the religious groups, the charities would all join in, and I think we would be better for doing that.” Meanwhile, former home secretary David Blunkett said the UK had a moral obligation to take about 25,000 refugees – which was still a fraction of Germany’s total. “We should concentrate on those coming through Turkey, who have been persecuted and ejected from Syria, and we should concentrate on women and children,” he said. While a global response was needed, Blunkett added: “If we are going to be taken seriously by anybody as a nation in putting that programme together, we are going to have to face the challenge of taking refugees in very large numbers ourselves.”

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Sign the petition.

Grant Visas To Refugees Before They Take The Death Route (ThePressProject)

By now, most of us have seen the gut-wrenching picture of the lifeless three year old Aylan who perished in the Aegean sea while trying to reach Greece. Little Aylan and his family have tried all legal means to reach Canada. But their applications were rejected. They were left with no other option than the perilous journey by sea. They paid for it with their lives. Just a few days earlier, more lifeless bodies of Syrian children were washed ashore after their desperate attempt to find refuge in Europe led to disaster. Dozens more have died a terrible death, suffocating in smuggler’s trucks, crushed by trains, perished of exhaustion, shot by armed coast guards. Some 2,600 people have perished so far in the Mediterranean waters, how many more deaths can we stomach?

Syrians first fled into the neighbouring countries of Jordan, Lebanon, and Turkey. Once there, they found that they had escaped into a prison. They are not allowed to work in Jordan – currently home to 630,000 refugees. They are banned from working in Lebanon – a country of four million people that hosts one million refugees. Turkey, where almost 2 million refugees have sought protection, is trying harder to support them inside their borders, but resources are running low. The US has announced that it will accept 1000 to 2000 refugees. Great Britain has relocated just 216. Syrians that are trying to use formal channels to obtain legitimate visas to Europe or Canada, see their applications rejected. There is no other hope left for them than to jump on a floating coffin to try and reach Europe and claim asylum.

Yet, the poorest of the poor and the unaccompanied Syrian children that beg in the streets of Amman, Istanbul, Beirut, have little hope to raise the money that smugglers are demanding to “sail” them to Europe. They will probably end their lives in the streets. How many floating bodies do we need to see before our governments start re-enforcing asylum processes in the host country? If Syrians could apply for protection while they are still in Turkey, Lebanon or Jordan, through formal channels, less people would opt to travel by sea, less people would become prey to smugglers.

We ask western Governments to create legal channels for the refugees which will grant humanitarian visas, and facilitate family reunions and resettlement, before Syrians are forced to take the “death route” to Europe. We ask the European countries, the United States and Canada to facilitate all mechanisms to allow Syrian refugees that are stranded in Turkey, Lebanon and Jordan, to be able to apply for visas and legal documents that they may travel to their chosen destination.

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“..we will not brutalise them, we will not force them to crawl under our fences, we will not write numbers on their skin and we will not ship them off on trains to nowhere.”

The March of Shame (Irate Greek)

They are people, like us. They are young, they are old, they are men, women and children, they are lawyers or masons or doctors or barbers or plumbers or computer engineers. They are people, and they are coming. Their countries fell apart, their houses were destroyed, their neighbours died. They lost friends and relatives, they lost their loved ones, they lost a limb. They fled. They took trucks or buses or cars or bicycles. They walked. They were smuggled, assaulted, abused, kidnapped on the way. They crossed a border, or two, or three. They were detained, arrested, beaten. They were parked in camps. They were told to live a life without a future, they were told to wait until their country is fixed, they were told to wait with no end in sight.

And then they came. Of course they came. They got on those rickety boats to cross the sea. Some of them were pushed back. Some of them sank and had to return to the coast. Some of them drowned. But they kept coming, and instead of greeting them with open arms, our governments screamed, “we’re being overrun!” Yes, we’re being overrun. It was about time it happened. Because as much as you expect people to stay put and die out of sight, out of mind, they have other plans for their life. As a matter of fact, they want a life worth living. And they are coming to get it. They are coming. Get over it, Europe, they are coming. And if we still want to call ourselves people, if we still want to call ourselves human beings, we will not turn our backs on them, we will not tell them to go away, we will not let them sleep in the streets of our harbours, we will not brutalise them, we will not force them to crawl under our fences, we will not write numbers on their skin and we will not ship them off on trains to nowhere.

There’s a limit to how long you can stay behind the safety of your television screen with pictures of dead children and destroyed cities, and your only reaction is, “how sad”. For them it’s beyond sad. They lost everything. Then they risked what little they had left to come, and they lost even more. ‘Sad’ doesn’t begin to describe that. They are not swarms, they are not invaders, they are not quotas. They are people. They want a life, a life in safety, with a job, a home and a future for their children. They are people, just like us. They are people, and there’s no stopping that. Today they are walking from Budapest to Vienna. Hundreds, maybe thousands of them, decided that they had enough of Viktor Orban’s nonsense, and when he wouldn’t re-establish the trains, they decided to walk.

But these people are only the tip of the iceberg. Europe’s march of shame started thousands of kilometers away. They are coming because of war, destruction, poverty, hopelessness. But this is a march of shame because we the people, we the European people, elected year after year leaders who don’t care about people but only about votes. And for years, despite our aging population, despite our immense wealth, despite all the good reasons for which we could open our borders, our leaders thought that pandering to the xenophobes was more important than helping people who have lost everything and that we could easily accommodate.

But they won’t wait anymore. They are coming, they are marching on Europe, and they are putting us to shame. For the young man in the picture below, the march of shame started when he pushed his grandmother’s wheelchair out of their family home and onto some road in Afghanistan. He has come thus far. Can anything stop him? Can he be made to go back? They are coming. And now it is for us to greet them, to care for them, to give them safe passage, to help them build the home they have lost. Not because we are Europeans, not because we have values, not even because we are filthy rich. But because we must be people. Like them.

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Merkel.

Migrants Stream Into Austria, Swept West By Overwhelmed Hungary (Reuters)

Hundreds of exhausted migrants streamed into Austria on Saturday, reaching the border on buses provided by an overwhelmed Hungarian government that gave up trying to hold back crowds that had set out on foot for western Europe. After days of confrontation and chaos, Hungary’s right-wing government deployed dozens of buses to move on migrants from the capital, Budapest, and pick up over 1,000 – many of them refugees from the Syrian war – walking down the main highway to Vienna. Austria said it had agreed with Germany that they would allow the migrants access, unable to enforce the rules of a European asylum system brought to breaking point by the continent’s worst refugee crisis since the Yugoslav wars of the 1990s.

Wrapped in blankets against the rain, hundreds of visibly exhausted migrants, many carrying small children, climbed off buses on the Hungarian side of the border and walked in a long line into Austria, receiving fruit and water from aid workers. “We’re happy. We’ll go to Germany,” said a Syrian man who gave his name as Mohammed. Hungary cited traffic safety for its decision to move the migrants on. But it appeared to mark an admission that the government had lost control in the face of overwhelming numbers determined to reach the richer nations of northern and western Europe at the end of an often perilous journey from war and poverty in the Middle East, Africa and Asia.

On Friday, hundreds broke out of an overcrowded camp on Hungary’s border with Serbia; others escaped from a stranded train, sprinting away from riot police down railway tracks, while still more took to the highway by foot led by a one-legged Syrian refugee and chanting “Germany, Germany!” The scenes were emblematic of a crisis that has left Europe groping for answers, and for unity. By nightfall, the Keleti railway terminus in Budapest, for days a campsite of migrants barred from taking trains west to Austria and Germany, was almost empty, as smiling families boarded a huge queue of buses that then snaked out of the capital.

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Utter lying cynicism: “Transportation safety can’t be put at risk..”

Over 1,000 Exhausted Migrants Reach Austria Border (AP)

More than 1,000 migrants, exhausted after breaking away from police and marching for hours toward Western Europe, have arrived before dawn Saturday on the border with Austria. The breakthrough became possible when Austria announced that it and Germany would take the migrants on humanitarian grounds and to aid their EU neighbor. In jubilant scenes on the border, hundreds of migrants bearing blankets over their shoulders to provide cover from heavy rains walked off from buses and into Austria, where volunteers at a roadside Red Cross shelter offered them hot tea and handshakes of welcome. Many collapsed in exhaustion on the floor, smiles on their faces.

Early Saturday, Austrian Chancellor Werner Faymann announced that it and Germany would take the migrants on humanitarian grounds and to aid their EU neighbor after speaking with German Chancellor Angela Merkel. Hours before, Hungary had announced it would mobilize a bus fleet to scoop the weary travelers overnight from Budapest’s main international train station and from the roadside of Hungary’s main highway and carry them to the Austrian border. In jubilant scenes on the border, hundreds of migrants bearing blankets over their shoulders to provide cover from heavy rains walked off from buses and into Austria, where volunteers at a roadside Red Cross shelter offered them hot tea and handshakes of welcome. Many collapsed in exhaustion on the floor, smiles on their faces.

Janos Lazar, chief of staff to Hungary’s prime minister, said authorities had reversed course and stopped trying to force migrants to go to state-run asylum shelters because the migrants’ movements were imperiling rail services and causing massive traffic jams. “Transportation safety can’t be put at risk,” he said. The asylum seekers chiefly from Syria, Iraq and Afghanistan often have spent months in Turkish refugee camps, taken long journeys by boat, train and foot through Greece and the Balkans, then crawled under barbed wire on Hungary’s southern frontier to a frosty welcome. While Austria, on Hungary’s western border, says it will offer the newcomers asylum opportunities, most say they want to settle in Germany.

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Guess who paid?

Hungary Provides 100 Buses To Take Refugees To Austrian Border (WaPo)

Sending Europe’s refugee crisis hurtling toward another country, Hungary’s leaders on Friday backed down from a confrontation with thousands of asylum-seekers, offering to bus the desperate migrants to the border with Austria. The late-night offer came after days of efforts to repel the thousands of migrants fleeing war and poverty who have streamed into Hungary in a bid to reach Western Europe, where they hope to begin new lives. Hungarian Prime Minister Viktor Orban had painted his hard-line approach against the mostly Muslim asylum-seekers as a stand to preserve Europe as a Christian continent.

But after a column of migrants more than a mile long streamed onto Hungary’s main highway to Austria, it appeared that authorities felt they had no alternative but to pass the challenge to their neighbor, another country that has been ambivalent about the influx. By early Saturday morning, the first asylum seekers began to walk across the border into Austria after having been dropped off by buses on the Hungarian side. The buses had picked people up at Budapest’s main train station. After initial hesitation, the crowds began to climb on board, relieved to be en route out of Hungary.

The Hungarian decision to provide up to 100 buses to take the asylum-seekers to the border did little to resolve the challenge facing Europe, which has failed to come up with a unified response to the mounting numbers on its borders. Instead, the plans simply shifted the crisis to another state, leaving the fundamental problem — a bloc of 503 million people unable to agree whether and how to house several hundred thousand refugees — to burn for another day.

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More like broken leadership.

This Refugee Crisis Is Too Big For Europe’s Broken Institutions (Paul Mason)

The disorder we have allowed to assemble at the borders of Europe does not easily divide into “economics” and “war”. The conceit that we can segment those coming here into the “deserving and undeserving” is going to shatter as their claims are processed. The immediate challenge for Europe is crisis management: the fiasco in Budapest is just the European leadership problem in microcosm. There is no coherence, no predictability and no urgency. As with Greece, and with the prolonged debt crisis of southern Europe, the institutions move sluggishly until leaders are forced into making flamboyant gestures, and no solution is ever reached. But, as they struggle to achieve coherence and to show compassion, the EU’s leaders are accumulating much bigger risks.

An EU into which half a million people can arrive to claim asylum in six months will struggle to justify the same rules and institutions as the Europe that believed its borders were under control. With Dublin III a dead letter, there will have to be a new asylum system based on reality. People will attempt to claim asylum whether they’re victims of war, drought or poverty. Either they’ll be processed in the place they want to settle, or there will have to be mass deportations back to Greece and Hungary – the two countries with the biggest fascist movements in the EU. And if hundreds of thousands of asylum seekers are given leave to remain in a continent where there is stagnation and mass unemployment, what happens to free movement? The home secretary, Theresa May, has already called for it to be constrained in response to the new situation.

The EU’s leaders can muddle along with broken institutions, flouted laws, flailing border police. Or they can think it through. The OECD’s central projection is that, to stand a chance of avoiding stagnation, the EU’s workforce will have to add 50 million more people through migration by 2060 (a similar number is needed in the US). The Paris-based thinktank says if that doesn’t happen, it is a “significant downside risk” to growth. What this means should be spelled out, because no politician has bothered to do so: to avoid economic stagnation in the long term, Europe needs migrants.

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“Finland, one of the wealthiest and least densely populated EU countries, said it would take a mere 800.” Finland’s PM offered to take refugess into his own home. All 800?

European Union Cracking Under Pressure Of Migrant Crisis (Globe and Mail)

The European Union is cracking, again. This time, it could shatter under the weight of a migrants’ crisis that has virtually every one of its member states madly pulling and pushing in all directions, undermining the founding concept of shared goals, vision, welfare – and shared pain. Every few years, the 28-country EU and the 19 countries within it that use the euro (the euro zone) face severe tests, typically the result of faulty crisis-fighting mechanisms or selfish national behaviour. These crises are inevitable, for the EU and the euro zone are economic and currency unions imposed upon sovereign countries, each of them fully capable of acting in its own interests when the going gets tough.

In 2012, when Europe was in deep recession and Greece in outright depression, the latter seemed on the verge of bolting from the euro zone and making a lie of the notion that the currency was “irreversible.” The European Central Bank (ECB), led by the eminently practical and flexible Mario Draghi, came to the rescue with a barrage of crisis-fighting mechanisms. They more or less worked – outright disaster was avoided – even if they exposed the fragility of the common currency. Three years later, when Greece decided once again to threaten the integrity of the euro zone, the ECB, backed by the financial might of Germany, prevented Greece from leaving. Thanks in good part to the bank, back-to-back existential crises were overcome, if only barely (Greece is an economic wreck and could still hit the road).

The current migrants’ crisis is much bigger than the one unleashed by the Greeks and there is no all-powerful migration version of Mr. Draghi to save the day. Potentially, millions of refugees and economic migrants from conflict areas in the Middle East and Africa are lining up to get in – some nine million Syrians have been displaced as the civil war shreds their country; many of them want to come to Europe. The numbers are already staggering – Europe is seeing the largest influx and internal movement of people since the end of the Second World War. About 350,000 people have entered this year, with Italy, Greece and, now, Hungary, bearing the brunt of the mass arrivals. In August alone, 50,000 migrants reached Hungary.

Almost 3,000 people have died so far this year in the Mediterranean. In April, a shipwreck off the Italian island of Lampedusa claimed 800 lives. On Aug. 28, the bodies of 71 migrants, many of them thought to be Syrian, were found in an abandoned truck in Austria. This week, the world was shocked by images of a three-year-old Syrian boy, whose lifeless body had washed up on a Turkish beach. He drowned when his family tried to reach the Greek island of Kos. But child deaths have been sadly routine among those making the treacherous voyage to southern Europe from Libya and Turkey. In April, several fishermen in Tunisia, near the badlands along the Libyan border, told The Globe and Mail that their nets sometimes snared the bodies of drowned African migrants, a few of them children.

The EU’s reaction to the migrant crisis has, all too predictably, been chaotic, contradictory, near-hysterical and sometimes mean-spirited, heightening the crisis and highlighting an ugly truth –– that the union has no mechanism to fix a disaster that could be managed to minimize the damage and stem outright bigotry. At the EU refugee relocation crisis meeting in July, some countries, such as Austria, refused to take any migrants; others agreed only to take a token number. Finland, one of the wealthiest and least densely populated EU countries, said it would take a mere 800. A few countries, notably Germany, agreed to take way more than their fair share.

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“The underlying reason is that the creditors wish to get their hands on as many Greek assets as possible at the lowest possible prices.”

The Poisoned Chalice (James Galbraith And J. Luis Martin)

Luis Martin: Since the outbreak of the Greek crisis in 2010, the European approach has been austerity now and the promise of supply-side policies later; once deficits have been brought under control and structural reforms have been implemented. Five years later, the Greek economy is depressed and debt has skyrocketed. In light of the third bailout Greece is now trying to secure, what is your vision for the Greek economy in the short and medium term?

James Galbraith: First of all, it’s important to distinguish between the public rationale for the policies that have been imposed on Greece, which are as you describe, and the underlying reasons which are quite different. The public rationale is the notion that so-called structural reforms will produce growth. The underlying reason is that the creditors wish to get their hands on as many Greek assets as possible at the lowest possible prices. Once you see that you’ll see that the policies are quite consistent with the reason, though not with the rationale.

What we are going to see now is an intensification of those policies and the liquidation of public and private assets in Greece: public assets which are being auctioned at undoubtedly low prices under the so-called privatization fund, and private assets because the Memorandum provides for accelerated liquidation, basically foreclosures of people’s homes and real estate and of the remaining Greek businesses. Basically that is the direction of policy, and if the Memorandum stays in place that is what we are likely to see.

LM: If you are correct, it would seem that the institutions (the IMF, the EC and the ECB) will have to rescue Greece indefinitely…?

JG: There is no “rescue” going on here. There is no “rescue,” there is no “bailout,” there is no “reform” going on. I really need to insist on this, because these words creep into our discourse. They are placed there by the creditors in order for unwary people to use them, but there is nothing of the kind taking place. What is going on is a seizure of the assets owned by the Greek state, by Greek businesses and by Greek households. There is no sense that this has anything to do with the recovery of the Greek economy or with the welfare of the Greek people. On the contrary, the policy is utterly indifferent to those considerations.

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“Greece is going to be the canary in the mine.”

On CNBC Discussing Greece And Europe – Full Transcript (Varoufakis)

CNBC: The market and a lot of watchers have been wondering what type of man Alexis Tsipras is following the referendum and his success politically, with some saying he’s a masterful politician, others think perhaps he’s just a newcomer who has had a little bit of luck and is now on borrowed time, or perhaps he’s a man that has really great mentors in Brussels. How would you describe him and his political success so far?

Oh there is no doubt he is an excellent politician. I’ve watched him up close; he has what it takes to be a genuine leader. There were very important junctures when he demonstrated his leadership and I witnessed it. But, the political situation in Greece is so toxic, and has been for years now. When you have an economic system which is in free fall and you have this astonishing situation, I don’t think that economic history and political history has ever seen this before, you have lenders, creditors, who are imposing upon you new loans under the conditions that will ensure that they will not get their money back, I think this is a unique historical phenomenon. So no politician, however skilled they might be, can survive the economic implosion which drags down along with it the political system.

CNBC: But Syriza hasn’t helped out here, and we’ve got the spilt from the left platform who have created their own party. Has this been detrimental to Tsipras’ future or has it handed him a golden opportunity to move to the centre of politics?

No, look, this kind of thinking would probably be appropriate under normal circumstances, but this Greece is not experiencing normal circumstances. What happened on the 12th of July was that there was an imposition by the Euro Summit of a programme that everybody in the Euro Summit knew was unviable on an economy which is in a great depression and this debt spiral, debt deflationary spiral, so once you come to this state of irrationality, reflecting Europe’s dithering, Europe’s inability to make up its own mind as to what it wants to do with its monetary union, there is no sense in going into this discussion about left, right, moving, shifting to the centre, median voters and all that.

Think of what happened to the previous governments. The socialist government of the Papandreou period of 2010 and 2011 imploded, the conservative government of Samaras imploded, our government imploded. Why? Because we rest on a foundation of an economy which is imploding and until and unless the economy gets stabilised, and we have some sensible discussion about debt, about investment, about credit, about reforms, which we have not had with the Troika because they were not interested in it, while they are sorting out their own disagreements about what to do with the monetary union, Greece is going to be the canary in the mine.

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No one wants a tighter Union, at least not outside of Brussels.

You Never Want a Serious Crisis to go to Waste (Legrain)

For now, the threat of Grexit has been avoided. Frantic French efforts to keep Greece in the euro succeeded, after Athens submitted to Germany’s punitive terms. But like threatening divorce in a bitter marital dispute, what’s said cannot be unsaid. Indeed, far from backtracking, the German Council of Economic Experts, which advises Chancellor Angela Merkel’s government, has suggested formalising Schäuble’s proposal: any country that breaches the fiscal rules and “continually fails to cooperate” should exit the monetary union. The message to those tempted to defy the German line could scarcely be clearer. Such a Germanic euro is unacceptable to many Europeans, not least in Paris and Rome.

France’s president, François Hollande, has instead called for a democratically accountable eurozone government. Italy’s finance minister, Pier Carlo Padoan, has echoed the French call for a fiscal and political union. Any proposal with the word “union” in it goes down well in Brussels. But a reality check is needed. There was little support for a federal eurozone government even before the crisis. And now that a financial crisis pitting creditors (the banks) against debtors has become a political conflict between countries, with nationalist insults flying and EU institutions discredited by siding with the creditors, European common feeling is in tatters. With the best will in the world, it is scarcely conceivable that Germans and French people could happily share a government, let alone Germans and Greeks.

There is manifestly little appetite among Europeans for further integration right now. It’s been a decade since the French and the Dutch voted No to the EU constitution and they have become much more sceptical since then. A recent survey by Opinium Research finds that the Dutch are almost as wary of deeper integration as the British, who will be soon voting on whether to leave the EU, while the French are close behind. A mere 17% of Dutch people and 24% of French ones favour further steps towards “ever closer union”, while 42% of Dutch people and 32% of French want to repatriate powers from Brussels. So forget about winning a referendum on steps towards a eurozone government.

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Been going on for a long time.

Capital Outflow From China Adds Another Layer Of Worry (MarketWatch)

In yet another sign of deteriorating confidence in China’s economic prospects, capital outflows from the country are accelerating quickly, adding another layer of worry for investors and policy makers alike. “If all of the capital that went into China since 2010 were to exit, this would mean another $400 billion could leave. If we were to assume that all of the capital inflows that went in since 2008 were to exit, the number rises to another $700 billion,” said David Woo, FX and rates strategist at Bank of America Merrill Lynch. While Woo’s projections are based on the worst-case scenario, analysts at Goldman Sachs in July had noted the alarming pace of funds exiting the country.

“Net capital outflows could be around $224 billion in the [second] quarter, meaningfully up from the first quarter,” they said. “Capital outflows have become very sizeable and now eclipse anything seen in the recent past.” In theory, China’s foreign exchange reserves of $3.6 trillion are sufficient to handle the capital flight, but Woo believes Chinese officials are running out of tools to prop up the economy, forcing them to make a tough choice. “China cannot lower interest rates and defend the Chinese yuan at the same time,” he said. And once the Federal Reserve hikes interest rates, which BAML still expects this month, the interest rate differential between China and the U.S. will further narrow, leading to more capital leaving the country, he said.

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But their governments keep denying anything’s wrong.

Canada, Australia Feel Squeeze In Wake Of Chinese Economic Slowdown (Guardian)

In the mining town of Port Hedland, 1,500km north of Perth, modest prefabricated homes called fibro shacks, which were changing hands for more than A$1m four years ago, are now failing to find a buyer at a third of the price. Apartment blocks hurriedly tacked together by developers at the peak of the country’s boom stand empty, because their promised supply of “fly-in-fly-out” mineworkers has dried up, along with the jobs they were brought in to do. In 2011, the iron ore-rich Pilbara region of north-west Australia was on the frontier of a 21st century gold rush, this time with iron ore as the main prize – driven by China’s formidable appetite for natural resources to build up its infrastructure and modernise its economy.

Pilbara boasted salaries two-thirds higher than the national average and almost 80% of workers were flown into their jobs from Australia’s big cities. Now, mortgaged to the hilt on homes that lost value almost before the paint had dried, the mineworkers that remain are accepting longer hours and lower wages in an effort to keep up with the repayments. Their plight resonates thousands of miles away in Calgary, Canada. Oil, not iron ore, has been the foundation of that city’s prosperity. But fears that China’s appetite for natural resources is waning are sapping confidence; and as oil prices have plunged, another property boom could soon turn to bust.

“There’s a lot of people here that have been losing their jobs from the energy sector,” says Ann-Marie Lurie, chief economist at local estate agency CREB. Property prices have so far held up, but she says Calgarians are watching the global oil price with alarm. “Into next year the real question becomes, how long are energy prices going to remain this low?” she says, pointing out that, with building starts declining, the knock-on effects are already rippling through the construction industry. She expects house prices in Calgary, which rose by almost 10% in 2014, to go into reverse by the end of this year.

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That’s a big number.

South Korean Exports Fall 14.7%, GDP Forecasts Cut (WSJ)

South Korea’s government has cut its forecast for the nation’s economic growth next year because of the risks from China’s slowdown, Seoul’s finance minister said. Close economic interlinkage between China and South Korea also means a sharp deterioration of the Chinese economy would have an “extremely huge impact” on South Korea, although a so-called hard landing for China is unlikely, South Korean Finance Minister Choi Kyung-hwan said in an interview. Concerns about the Chinese economy are particularly acute in South Korea, an export-dependent nation that sends around a quarter of its overseas shipments to China. South Korean exports fell 14.7% from a year earlier in August—the sharpest drop in six years—as exports to China slid 8.8%.

Wild swings in global financial markets following a currency devaluation in China on Aug. 11 reflect fears that the world’s second-largest economy is entering a major downshift. “China is unlikely to crash-land. It has the capability to manage a soft landing,” Mr. Choi said in an interview with The Wall Street Journal on the sidelines of a conference for finance chiefs from the Group of 20 developed and major developing economies. “But a hard landing could have an extremely huge impact on South Korea.” Due to the increasing risks of a Chinese slowdown, South Korea cut its own growth forecast for 2016 to 3.3% from 3.5% when drawing up a new budget plan for next year, the minister said.

The budget details will be announced on Monday. For this year, there is no change to the forecast of 3.1% growth. Mr. Choi said the government was trying to achieve the target, citing stimulus efforts including the central bank’s policy rate cuts four times since last year and recently announced supplementary budget spending. South Korea’s economy expanded 3.3% last year. In the interview, the minister also called for the U.S. Federal Reserve to make more efforts to reduce uncertainty over pace of its expected interest rate increases through sufficient communications with markets.

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Very interesting. Does math describe life?

Scientists Find Mathematical Secret To How Nature Works (WaPo)

In nature, the relationship between predators and their prey seems like it should be simple: The more prey that’s available to be eaten, the more predators there should be to eat them. If a prey population doubles, for instance, we would logically expect its predators to double too. But a new study, published Thursday in the journal Science, turns this idea on its head with a strange discovery: There aren’t as many predators in the world as we expect there to be. And scientists aren’t sure why. By conducting an analysis of more than a thousand studies worldwide, researchers found a common theme in just about every ecosystem across the globe: Predators don’t increase in numbers at the same rate as their prey. In fact, the faster you add prey to an ecosystem, the slower predators’ numbers grow.

“When you double your prey, you also increase your predators, but not to the same extent,” says Ian Hatton, a biologist and the study’s lead author. “Instead they grow at a much diminished rate in comparison to prey.” This was true for large carnivores on the African savanna all the way down to the tiniest microbe-munching fish in the ocean. Even more intriguing, the researchers noticed that the ratio of predators to prey in all of these ecosystems could be predicted by the same mathematical function — in other words, the way predator and prey numbers relate to each other is the same for different species all over the world. “That’s what was very surprising to us, to see this same pattern come up over and over,” Hatton says. But what’s actually driving the pattern remains something of a mystery.

Hatton and his colleagues suspect that different aspects of different ecosystems may drive the predator-prey ratio: For example, Hatton says, competition for space might be a major factor controlling animal populations, but changes in the nutrients used and produced by plankton might have more of an effect on some marine ecosystems. The thing that’s puzzling is that the same mathematical function can be used to predict all of these ecosystems’ responses. And that’s not all: In a strange twist, the researchers observed that the same function can also be used to predict several other natural processes as well. One of these is the reproduction rates of prey species. If you remove predators from an ecosystem, prey populations start to increase, since there’s nothing eating them.

But there’s a catch: As their populations continue to grow, they reproduce at lower and lower rates – in other words, they continue to increase their numbers, but more and more slowly. And their growth rate can be predicted by the same mathematical function used to predict the way predators increase in response to their prey. Even more fascinating is that the same function applies to certain processes in individual organisms’ bodies. One phenomenon observed consistently in nature is that smaller animals, like mice, tend to be faster, have higher metabolisms, live shorter lives and reproduce at higher rates, while large animals, like elephants, are slower in all aspects. So as size increases, the rate at which bodily functions are performed changes. And the pattern in these changes is governed by – you guessed it – that same mathematical function.

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Jun 282015
 
 June 28, 2015  Posted by at 11:42 am Finance Tagged with: , , , , , , , ,  


Harris&Ewing Goat team, Washington, DC 1917

A Perfect Storm Of Crises Blows Apart European Unity (Guardian)
The Losses For The EU Lenders Are Truly Eye-Watering (Muscatelli)
The Greek Butterfly Effect: Forcing The Issue of Math (Northman Trader)
Intervention in 27th June 2015 Eurogroup Meeting (Yanis Varoufakis)
Forget Greece, Portugal Is The Eurozone’s Next Crisis (MarketWatch)
Goldman’s Stunner: A Greek Default Is Precisely What The ECB Wants (Zero Hedge)
Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair (Bloomberg)
Here’s Why Any Greek Debt Deal Will Amount To Nothing (Satyajit Das)
Europe’s Moment of Truth (Paul Krugman)
Wikileaks: Plot Against Former Greek PM’s Life, ‘Silver Drachma’ Plan (GR)
Greece Referendum: Why Tsipras Made the Right Move (Fotaki)
IMF Heads Must Roll Over Shameful Greek Failings (Telegraph)
Austrians Launch Petition To Quit EU (RT)
The Government Must Run Deficits, Even In Good Times (Ari)
Pope Francis Recruits Naomi Klein In Climate Change Battle (Observer)

Because it has no morals.

A Perfect Storm Of Crises Blows Apart European Unity (Guardian)

The time was shortly after 3am when David Cameron descended from level 80 of the vast Justus Lipsius building in Brussels on Friday. The birds were singing as he was whisked away for a much-curtailed sleep at the British ambassador’s residence, five minutes up the road. The prime minister is no novice when it comes to long and tedious discussions at European summits. But what he had just witnessed over a seemingly never-ending dinner with the other 27 EU leaders was something different altogether. The immediate crisis under discussion was migration and what the EU should do to handle the many thousands who have crossed the Mediterranean from Africa and the Middle East and arrived via Italy and the western Balkans over recent months.

Increasingly, Europe is a magnet for those seeking a better life. But the EU does not know how to react and the problems are spreading. Last week a strike by French workers at Calais caused huge tailbacks on motorways leading to both the ferry port and Channel tunnel as hundreds of migrants – mainly from east Africa, the Middle East and Afghanistan – tried to take advantage of queueing traffic by breaking into lorries bound for the UK. Against this background, a supposedly cordial working dinner, held high in the Council of Ministers building, rapidly descended into personal insults and finger-jabbing – which an exhausted-looking Cameron later summed up as “lengthy and, at times, heated discussions”.

Matteo Renzi, the Italian prime minister, was incensed by the refusal of several countries, including Hungary, which has taken in 60,000 refugees since the beginning of the year, and the Czech Republic, to agree to take part in a compulsory refugee-sharing scheme to help ease Italy’s burden. Cameron kept fairly quiet. The UK has opted out of EU asylum policy and Renzi, who was in an emotional state, did not need to be reminded of its non-participation. But others took up the cudgels as the row intensified across the table. Dalia Grybauskaite, the Lithuanian president, told Renzi in no uncertain terms that her country would not take part either. Bulgaria, one of the EU’s poorest countries, took a similar line. Disputes flared. European commission president Jean-Claude Juncker, prime mover behind the idea of compulsory burden sharing, and council president Donald Tusk tore strips off each other over what should be done, as inter-institutional solidarity broke down.

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They don’t seem to realize that though.

The Losses For The EU Lenders Are Truly Eye-Watering (Muscatelli)

Greece is on the brink. Even if a last-minute deal is found it is clear that the solutions proposed are little more than a way to delay the crisis. A more comprehensive resolution of the Greek tragedy needs to address the medium-term (non-)sustainability of the Greek debt position. Economists know that negotiations usually break down when there is uncertainty in bargaining. When the two sides are uncertain as to what gains and losses the other side can make through any deal or by walking away. In this case, part of the uncertainty is political, because the Greek and other EU governments don’t fully know what might be acceptable to their electorates. But a good part of the uncertainty at this bargaining table is economic. Because we are in totally uncharted waters.

Monetary unions can be, and have been, dissolved before in history but, except in the aftermath of wars, not usually in anger. There are several sources of uncertainty for both sides in the dispute. First, if Greece leaves the Eurozone, at one level it will have greater freedom to walk away from at least some its debt, or to restructure it in a way which suits its short-term economic need. It could plan a moderate primary surplus. The problem for the Greek government is that it will inherit a broken banking system and there will be great uncertainty on whether a devaluing new Drachma could benefit its net trade position, with an impaired financial system, and shut out from world capital markets. Greece is not Iceland, and there is less social consensus on how to share the short-run burden of economic adjustment in a Grexit scenario.

Second, the losses for the EU lenders are truly eye-watering. The two bail-out packages for Greece amount to €215.8 billion. Of these €183.8 billion came from other EU countries and the rest from the IMF. The biggest shares of the support through the European Financial Stability Facility came from Germany and France. None of this includes the cost of support given to the Greek banking system via the ECB. The IMF would suffer considerable losses too (the UK’s main exposure is through this channel). The impact of Grexit and a partial or full debt repudiation on the rest of the EU would be considerable. Paradoxically by triggering a Grexit rather than an orderly debt restructure, the EU lenders may lose more of their current bail-out. So why are they not more accommodating? Because if it stays in, Greece will need a further bail-out, as no-one believes the current plan is sustainable. It’s that uncertainty again.

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Dead on. 1- 2 = -1.

The Greek Butterfly Effect: Forcing The Issue of Math (Northman Trader)

Many times nothing happens for a long time. Then all of a sudden everything happens at once. Like a dam break. It builds slowly and then it bursts. Example: Who would have ever thought the Confederate flag would be taken down across the South during the same week that a rainbow flag is symbolically hoisted across the entire country? Just because things seem unthinkable doesn’t mean they won’t happen. Take the global debt construct as another example. For decades the world has immersed itself in ever higher debt. The general attitude has been one of indifference. Oh well, it just goes higher. Doesn’t really impact me or so the complacent rationalize. When the financial crisis brought the world to the brink of financial collapse the solution was based on a single principle:

Make the math workable. In the US the 4 principle “solutions” to make the math workable were to:
1. End mark to market which had the basic effect of allowing institutions to work with fictitious balance sheets and claim financial viability.
2. Engage in unprecedented fiscal deficits to grow the economy. To this day the US, and the world for that matter, runs deficits. Every single year. The result: Global GDP has been, and continues to be overstated as a certain percentage of growth remains debt financed and not purely organically driven.
3. QE, to flush the system with artificial liquidity, the classic printing press to create demand out of thin air.
4. ZIRP. Generally ZIRP has been sold to the public as an incentive program to stimulate lending and thereby generate wage growth & inflation. While it could be argued it had some success in certain areas such as housing, the larger evidence suggests that ZIRP is not about growth at all.

ZIRP’s true purpose is actually much more sinister: To make global debt serviceable. To make the math work without a default. Here’s the reality: If we had “normalized” rates tomorrow the entire financial system would collapse under the weight of the math. In short: Default. Which brings us to Greece the butterfly, the truth and indeed the future: Greece for all its structural faults is the most prominent victim of fictitious numbers. From the original Goldman Sachs deal to get them into the EU based on fantasy numbers and to numerous bail-outs, the simple truth has always been the same: The math doesn’t work. It never has and it never will until there is a default on at least some of the debt. And in this context the Greek government’s move to call for a public referendum on July 5 may be a very clever strategic move as it forces the issue of math.

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“The very idea that a government would consult its people on a problematic proposal put to it by the institutions was treated with incomprehension and often with disdain bordering on contempt.”

Intervention in 27th June 2015 Eurogroup Meeting (Yanis Varoufakis)

Colleagues, In our last meeting (25th June) the institutions tabled their final offer to the Greek authorities, in response to our proposal for a Staff Level Agreement (SLA) as tabled on 22nd June (and signed by Prime Minister Tsipras). After long, careful examination, our government decided that, unfortunately, the institutions’ proposal could not be accepted. In view of how close we have come to the 30th June deadline, the date when the current loan agreement expires, this impasse of grave concern to us all and its causes must be thoroughly examined.

We rejected the institutions’ 25th June proposals because of a variety of powerful reasons. The first reason is the combination of austerity and social injustice they would impose upon a population devastated already by… austerity and social injustice. Even our own SLA proposal (22nd June) is austerian, in a bid to placate the institutions and thus come closer to an agreement. Only our SLA attempted to shift the burden of this renewed austerian onslaught to those more able to afford it – e.g. by concentrating on increasing employer contributions to pension funds rather than on reducing the lowest of pensions. Nonetheless, even our SLA contains many parts that Greek society rejects.

So, having pushed us hard to accept substantial new austerity, in the form of absurdly large primary surpluses (3.5% of GDP over the medium term, albeit somewhat lower than the unfathomable number agreed to by previous Greek governments – i.e. 4.5%), we ended up having to make recessionary trade-offs between, on the one hand, higher taxes/charges in an economy where those who pay their dues pay through the nose and, on the other, reductions in pensions/benefits in a society already devastated by massive cuts in basic income support for the multiplying needy.

Let me say colleagues what we had already conveyed to the institutions on 22nd June, as we were tabling our own proposals: Even this SLA, the one we were proposing, would be extremely onerous to pass through Parliament, given the level of recessionary measures and austerity it entailed. Unfortunately, the institutions’ response was to insist on even more recessionary (aka parametric) measures (e.g. increasing VAT on hotels from 6% to 23%!) and, worse still, on shifting the burden massively from business to the weakest members of society (e.g. to reduce the lowest of pensions, to remove support for farmers, to postpone ad infinitum legislation that offers some protection to badly exploited workers).

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There’s more than one candidate.

Forget Greece, Portugal Is The Eurozone’s Next Crisis (MarketWatch)

In the end, they kicked the can a little further down the road. After keeping the markets on a cliff-hanger for the last week, wondering whether the Greeks might end up getting kicked out of the eurozone, a deal of some sort looks likely. It won’t fix Greece, and it won’t fix the euro either. But it will patch the whole system up until Christmas — and that will buy everyone some time to concentrate on something else. And yet, in reality, the real crisis may not be in the east of the eurozone, but right over in the west. Portugal is the ticking time-bomb waiting to explode. Why? Because the country has run up unsustainable debts, most of the money is owed to foreigners, and with the economy still in deep trouble it may have to default as well.

The elections later this year may well trigger the second Portuguese crisis — and that will reveal how the problems in Europe involve far more than just Greece, even if that attracts most of the world’s attention. All the evidence suggests that, once the debt-to-GDP ratio climbs into the 130% bracket and above, it is basically unsustainable. Back in 2011 and 2012, when the euro crisis first flared up, three countries went bust. Of those, Greece is still in intensive care, and looks likely to remain so for the foreseeable future — the Greeks look willing to do just enough to stay in the eurozone, while the rest of Europe is willing to offer it just enough money to stay afloat while making it impossible to grow (it is a reverse Goldilocks — probably the worst of all possible solutions).

Ireland, which was always the strongest of the three bankrupt nations, is now growing again at a reasonable rate, helped along by the robust recovery in the U.K., which is still its main export market. And then there is Portugal — which is not in Greek-style permanent crisis, and yet does not seem capable of a sustainable recovery. On the surface, Portugal looks in much better shape than it did three years ago. It has exited the bailout scheme, leaving the program in May last year, after hitting European Central Bank and International Monetary Fund targets. The economy is starting to expand again. GDPt rose by 0.4% in the latest quarter, extending the run to a whole year of expansion, taking the annual growth rate up to 1.5%. It is forecast to expand by another 1.6% this year.

If Portugal can indeed recover, that would be a big win for the EU and IMF. Their catastrophic mix of internal devaluation and austerity looks to have been a complete failure in Greece, but if they can make it work in both Ireland and Portugal, the reputation of both institutions could be salvaged.

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Don’t think the ECB is smart enough to oversee the fall-out.

Goldman’s Stunner: A Greek Default Is Precisely What The ECB Wants (Zero Hedge)

[..] if this is correct, Goldman essentially says that it is in the ECB’s, and Europe’s, best interest to have a Greek default – and with limited contagion at that – one which finally does impact the EUR lower, and resumes the “benign” glideslope of the EURUSD exchange rate toward parity, a rate which recall reached as low as 1.05 several months ago before rebounding to its current level of 1.14. Needless to say, that is a “conspiracy theory” that could make even the biggest “tin foil” blogs blush. A different way of saying what Goldman just hinted at: “Greece must be destroyed, so it (and the Eurozone) can be saved (with even more QE).” Or, in the parlance of Rahm Emanuel’s times, “Let no Greek default crisis go to QE wastel.” Goldman continues:

Greece, like many emerging markets before it, is suffering a balance of payments crisis, whereby a “sudden stop” in foreign capital inflows caused GDP to fall sharply. In emerging markets, this comes with a large upfront currency devaluation – on average around 30% across nine key episodes (Exhibit 1) – that lasts for over four years. This devaluation boosts exports, so that – as unpleasant as this phase of the crisis is – activity rebounds quickly and GDP is significantly above pre-crisis levels five years on (Exhibit 2).

In Greece, although unit labor costs have fallen significantly, price competitiveness has improved much less, with the real effective exchange rate down only ten% (with much of that drop only coming recently). This shows that the process of “internal devaluation” is difficult and, unfortunately, a poor substitute for outright devaluation. The reason we emphasize this is because, even if a compromise is found that includes a debt write-down (as the Greek government is pushing for), this will do little to return Greece to growth. Only a managed devaluation can do that, one where the creditors continue to lend and help manage the transition.

Here, Goldman does something shocking – it tells the truth! “As such, the current stand-off is about something much deeper than the next disbursement. It signals that the concept of “internal devaluation” is deeply troubled.” Bingo – because what Goldman just said in a very polite way, is that a monetary union in which one of the nations is as far behind as Greece is, and recall just how far behind Greece is relative to IMF GDP estimates imposed during the prior two bailouts..

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It’s stunning to see that when confronted with basic democracy, the press has no idea what to say or do.

Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair (Bloomberg)

Economists with PhDs and hedge-fund traders can barely stay on top of the vagaries of Greece’s spiraling debt crisis. Now, try getting grandma to vote on it. That’s what Prime Minister Alexis Tsipras is doing by calling a snap referendum for July 5 on the latest bailout package from creditors. The 68-word ballot question namechecks four international institutions and asks voters for their opinion on two highly technical documents that weren’t made public before the referendum call and were only translated into Greek on Saturday.
Worse, they may no longer be on the table. International Monetary Fund chief Christine Lagarde told the BBC late on Saturday that “legally speaking, the referendum will relate to proposals and arrangements which are no longer valid.”

Tsipras’s decision means everyone from fishermen to taxi-drivers and factory workers will have to form an opinion on the package, with their country’s economic future hanging in the balance. A rejection of the bailout terms could lead to an exit from the euro area and economic calamity; accepting them would probably keep Greece in the euro, but with more austerity. “Usually in democracies, it’s the technocrats and the politicians who take care of the details, while voters are asked about broader issues and principles,” said Philip Shaw, the chief economist in London at asset manager Investec. “This is a transfer of responsibility from parliament to the voters.”

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The numbers stopped making sense long ago. Quit looking at the numbers.

Here’s Why Any Greek Debt Deal Will Amount To Nothing (Satyajit Das)

All the heated negotiations and analysis around a bailout for Greece seem oblivious to the key problems of any settlement. Since February’s “deal,” the parties have inched close to an agreement in a prolonged battle of alternative drafts (some incorrect; other misdirected). It remains highly uncertain whether agreement can be reached. The creditors insist this is their “last and best” offer. The Greeks bluster about democracy and blackmail. Now, the Greek government has called a snap referendum on the new proposals. In its current form, the terms will represent a few concessions by the creditors, but almost total capitulation by the Greek government. Consider:

First, the agreement is likely to cover five months, necessitating a more comprehensive further program, which will inevitably require creditors to provide new financing to Greece (in effect a third bailout) if default is to be avoided. Second, the focus originally has been on the release of €7.2 billion from the existing second bailout program. If the amounts that Greece has run down from reserves, pensions and also its account at the IMF are replaced, then there is little additional new funding to Greece. It seems the European have found a little more money, by shuffling funds, whereby the amount would be a more “generous” 17 or so billion euro. But it is far from clear what Greece needs in any case.

Third, the issue of debt repayments or relief is not addressed, other than in vague terms. Greece has commitments of around 5-10 billion euro each year plus the continuing need to roll over around €15 billion in short-term Treasury bills. Greece may not have the ability to meet these obligations on an ongoing basis. This does not take into account additional funding needs of the State that may arise from budget shortfalls or the need of Greek banks.

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Oh, c’mon, I feel so awkward agreeing with Krugman….

Europe’s Moment of Truth (Paul Krugman)

Until now, every warning about an imminent breakup of the euro has proved wrong. Governments, whatever they said during the election, give in to the demands of the troika; meanwhile, the ECB steps in to calm the markets. This process has held the currency together, but it has also perpetuated deeply destructive austerity — don’t let a few quarters of modest growth in some debtors obscure the immense cost of five years of mass unemployment. As a political matter, the big losers from this process have been the parties of the center-left, whose acquiescence in harsh austerity — and hence abandonment of whatever they supposedly stood for — does them far more damage than similar policies do to the center-right.

It seems to me that the troika — I think it’s time to stop the pretense that anything changed, and go back to the old name — expected, or at least hoped, that Greece would be a repeat of this story. Either Tsipras would do the usual thing, abandoning much of his coalition and probably being forced into alliance with the center-right, or the Syriza government would fall. And it might yet happen. But at least as of right now Tsipras seems unwilling to fall on his sword. Instead, faced with a troika ultimatum, he has scheduled a referendum on whether to accept. This is leading to much hand-wringing and declarations that he’s being irresponsible, but he is, in fact, doing the right thing, for two reasons.

First, if it wins the referendum, the Greek government will be empowered by democratic legitimacy, which still, I think, matters in Europe. (And if it doesn’t, we need to know that, too.) Second, until now Syriza has been in an awkward place politically, with voters both furious at ever-greater demands for austerity and unwilling to leave the euro. It has always been hard to see how these desires could be reconciled; it’s even harder now. The referendum will, in effect, ask voters to choose their priority, and give Tsipras a mandate to do what he must if the troika pushes it all the way. If you ask me, it has been an act of monstrous folly on the part of the creditor governments and institutions to push it to this point. But they have, and I can’t at all blame Tsipras for turning to the voters, instead of turning on them.

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Getting ugly.

Wikileaks: Plot Against Former Greek PM’s Life, ‘Silver Drachma’ Plan (GR)

Evidence pointing to international espionage, a plot to murder former Greek Prime Minister Costas Karamanlis and a 2012 plan for Greece’s exit from the euro code-named the “Silver Drachma” are just some of the sensational findings unveiled in a report by Greek Anti-Corruption Investigator Dimitris Foukas, released on Friday and sent to the Justices’ Council for consideration. The report outlines the findings of three converging judicial investigations spanning several years, initiated after the notorious phone-tapping scandal in 2005 and revelations that the mobile phones of then Prime Minister Karamanlis and dozens of other prominent Greeks were under surveillance.

This investigation later merged with that of the “Pythias Plan’” – for the neutralization and even murder of Karamanlis – and allegations that Greek National Intelligence Service officers and former Minister Michalis Karchimakis had leaked classified state secrets and documents. Foukas cited evidence – including Wikileaks reports – supporting the existence of the Pythias Plan, which he said was designed to exert pressure on the Greek government to change its policy in crucial sectors, such as energy, arms procurements and public sector procurements. According to the report, the rapprochement between Greece and Russia provoked action by the United States to avert agreements for Russian pipelines, leading to the gradual abandonment of the plans by Athens and its commitment to the Trans-Adriatic Pipeline (TAP), as well as the cancellation of plans to acquire Russian military equipment.

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Word: “With hundreds of thousands of people depending on soup kitchens, and thousands of suicides in the years 2010-2015, the moral case for debt forgiveness seems just as strong as the technical one based on economics.”

Greece Referendum: Why Tsipras Made the Right Move (Fotaki)

Greece will hold a referendum on July 5 on whether the country should accept the bailout offer of international creditors. The government’s decision to reject what was on offer and call the referendum is ultimately an attempt to take charge of its domestic policy and reaffirm its credibility with voters. Although Greece is hard strapped for cash this is clearly a political decision with profound consequences for the future of the European Union. It is also the right one. This is not merely useful as a negotiating tactic for obtaining a better deal with its creditors, as many commentators might suggest. The coalition of the left, Syriza, had no choice but to oppose further measures that would lock its economy into a deflationary spiral, the trappings of which are destroying Greek society.

Elected with the mandate to end the savage austerity policies already imposed, Syriza could hardly accept the further cuts demanded. These include cuts in income support for pensioners below the poverty line and a VAT hike of up to 23% on food staples. Even more onerous was the demand that Greece should deliver a sustained primary budget surplus of 1% for 2016, gradually increasing to 3.5% in the following years when its economy has already been contracting for six years. By most counts the austerity policies imposed by Greece’s creditors in 2010 in exchange for the bailout money have been an abject economic and moral failure. The IMF itself has acknowledged “a notable failure” in managing the terms of the first Greek bailout, in setting overly optimistic expectations for the country’s economy and underestimating the effects of the austerity measures it imposed.

The former IMF negotiator, Reza Moghadam, has acknowledged the fund’s erroneous projections about Greek growth, inflation, fiscal effort and social cohesion. The debt is now almost 180% of Greece’s GDP, up from 120% when the bailout program began. And this is mainly due to the fact that GDP has contracted by 25%, rather than the significantly lower projections by the IMF. The shrinking of the economy and rising unemployment levels have exceeded those that hit the US in the financial crisis of the 1930s. The human and social costs have been even more staggering in Greece. Incomes have fallen by an average of 40%, and the unemployment rate reached 26% in 2014 (and higher than 50% for youth). With hundreds of thousands of people depending on soup kitchens, and thousands of suicides in the years 2010-2015, the moral case for debt forgiveness seems just as strong as the technical one based on economics.

Yet in the terms presented to Greece by their creditors there is no commitment to reducing Greece’s crippling debt (which all commentators acknowledge is unrepayable). Nor is there any tangible proposal for rebuilding the Greek economy. Germany, France, and the EU, aided by the IMF and ECB, continue to insist on implementing policies that have so manifestly failed Greece. They do so to avoid having to justify the massive bailouts of their own financial systems – shifting the burden from banks to taxpayers – if Greece fails to make the repayments. The leading EU partners must not be seen to act leniently towards Greece as this might encourage anti-austerity parties Spain and elsewhere.

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No, the IMF should be dismantled.

IMF Heads Must Roll Over Shameful Greek Failings (Telegraph)

Whatever the eventual outcome of the Greek debt talks, there are a number of judgments can already be made; one is that a large part of the blame for this ever deepening debacle lies at the doors of the International Monetary Fund, which from the very beginning has had both its priorities and its analysis of the situation hopelessly wrong. The IMF is meant to fix these things; instead, it has conspired to turn what should have been a containable crisis into a total disaster. With its reputation in tatters and its credibility shot to bits, it is small wonder that China and others are seeking alternative, rival models of governance for the global financial system. If this were any normal organisation, the IMF’s managing director, Christine Lagarde, would be forced to resign and someone with less of a vested interest in propping up the folie de grandeur of EMU installed in her place.

Tharman Shanmugaratnam, deputy prime minister of Singapore – measured, clever, internationally respected and impressively free- market orientated in his approach to global affairs – would make an excellent choice, though even he, as a long-standing chairman of the IMF’s policy committee, is somewhat tainted. It may require a complete outsider. Crisis management is of course what the IMF is there for; and if in the thick of a crisis, you are almost bound to get flak. Has there ever been a crisis in the IMF’s 70-year history that was not said to have done irreparable damage to the organisation’s reputation? It’s hard to think of one. Whatever it does, the IMF always gets it in the neck. Take the Russian financial crisis of 1998. The $5bn the IMF lent to help the country over its difficulties was immediately stolen and spirited away into Swiss bank accounts.

Or the pre-millennial Asian crises, where the IMF was accused of imposing a degree of austerity on afflicted nations it would never dare advocate for any G7 economy. I could go on, but it would fill the rest of the newspaper. In any case, criticism comes with the territory, which is possibly why the IMF has always been so impervious to it, and also why it repeatedly fails to learn from its mistakes. By any standards, however, the IMF’s entanglement with the eurozone crisis is a whopper of a screw-up. Nor is it something in which the IMF should have got involved in the first place. Europe, one of the richest regions in the world, should have been left to sort out its own affairs. This is more particularly the case as the Greek debt crisis is almost entirely one of the eurozone’s own making.

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Shut off the light on your way out.

Austrians Launch Petition To Quit EU (RT)

Austrians have launched a petition to quit the EU, arguing that the nation will be better off economically if it leaves the union. To force the national parliament to consider the initiative activists need to have gathered 100,000 signatures by July 1. The petition was started by a retired 66-year-old translator, Inge Rauscher, who has collected enough signatures to launch an official campaign. The plea seeks to request that the national parliament debate the idea of a referendum on quitting the EU. However, to get that issue even discussed, the petition must gather 100,000 signatures. “We want to go back to a neutral and peace-loving Austria,” Rauscher said at the start of the campaign this week. Austrians have until July 1 to sign the petition which they can do in municipal or district offices.

Rauscher and her non-partisan Heimat & Umwelt committee (Homeland and Environment) argue that Austria will benefit from leaving the EU both economically and environmentally. She also criticized Austria’s forceful endorsement of EU sanctions against Russia, generally blaming Brussels for the economic downturn. “We are not any longer a sovereign state in the European Union. Over 80% of all essential legislation is being imposed by Brussels, not by elected commissioners. In our view, Europe is not a democracy. The European Parliament does not even have legislative powers,” Rauscher told Sputnik Radio.

An independent Austria, the committee believes, would gain an extra €9,800 per household per year, because the country will be freed from the burdens of EU bureaucracy. Recent polls show that only about one third of Austrians would be in favor of leaving the EU, according to the Local. The idea is championed by both the right-wing Freedom Party and the Euro-skeptic Team Stronach party. “This initiative is open for all political parties and we expect a broad support,” Rauscher said. “This is proved by our numerous conversations with the citizens over the past months.”

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Ari, interesting, but you kill your own argument by defining inflation as rising prices.

The Government Must Run Deficits, Even In Good Times (Ari)

It is my view that it is very important to keep things simple and this is what I will aim to do here. I will get down to the simplest identity and build from there using empirical data. I will draw conclusions which logically follow from the data and base assumptions. But despite the elementary nature of the idea, I still think that what it will show is very informative and the conclusion it leads to is one that the current government in the UK would be appalled to consider. Although the conclusion will be surprising to some people, I believe that every step of the logic shown here is undeniably true. I would be very interested if someone can show me a faulty link in the chain. The starting point is the basic identity here:

If GDP in one year is given by £A, then the total amount of money spent on domestic goods and services is £A.
If nominal GDP the next year grows by proportion n, then GDP in year two is given by £A*(1+n) and the total amount of money spent in year two is also £A*(1+n).
What it means is that, if, for example, growth is 2% and inflation is 2%, then a total of 4% more money MUST be spent in year two than was spent in year one.

The question I will mainly be answering in the rest of this post is ‘where does this money come from?’. I will not just try to answer this question in the abstract but to quantify the effect of different sources of money. When money is spent in an economy then it contributes to nominal GDP. Nominal GDP growth is the increase in A above. The economy can be simplified to how much money was spent and how much of that leads to real growth and how much to inflation. I will try to show, using empirical data, the source of funding for our economic growth and how this leads to the conclusion that we have a big problem now. I am trying to keep things simple so I will avoid using any long equations, but to see this idea broken down into greater detail, it can be seen in the model I develop here and give an example of here (where I explain that the next crash we will have could well be a painful one).

I am not too concerned with the supply side during this discussion; it is a different issue. For example, better infrastructure and training will increase future real growth by improving productivity. There are two sides to an economy and both are important. However all of this is irrelevant for this analysis because it is just looking at the importance of demand. Deficiencies in supply will be shown in inflation figures. The supply side can expand supply to fill a certain amount of the demand as demand grows. This is dependent upon the spare capacity in the economy. If many people are out of work, then it would be easier to fulfill an increase in demand than if there is full employment. This will show in the numbers. The higher the level of GDP, the higher proportion of the extra spending that will lead to inflation.

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Not sure about this…

Pope Francis Recruits Naomi Klein In Climate Change Battle (Observer)

She is one of the world’s most high-profile social activists and a ferocious critic of 21st-century capitalism. He is one of the pope’s most senior aides and a professor of climate change economics. But this week the secular radical will join forces with the Catholic cardinal in the latest move by Pope Francis to shift the debate on global warming. Naomi Klein and Cardinal Peter Turkson are to lead a high-level conference on the environment, bringing together churchmen, scientists and activists to debate climate change action. Klein, who campaigns for an overhaul of the global financial system to tackle climate change, told the Observer she was surprised but delighted to receive the invitation from Turkson’s office.

“The fact that they invited me indicates they’re not backing down from the fight. A lot of people have patted the pope on the head, but said he’s wrong on the economics. I think he’s right on the economics,” she said, referring to Pope Francis’s recent publication of an encyclical on the environment. Release of the document earlier this month thrust the pontiff to the centre of the global debate on climate change, as he berated politicians for creating a system that serves wealthy countries at the expense of the poorest. Activists and religious leaders will gather in Rome on Sunday, marching through the Eternal City before the Vatican welcomes campaigners to the conference, which will focus on the UN’s impending climate change summit.

Protesters have chosen the French embassy as their starting point – a Renaissance palace famed for its beautiful frescoes, but more significantly a symbol of the United Nations climate change conference, which will be hosted by Paris this December. Nearly 500 years since Galileo was found guilty of heresy, the Holy See is leading the rallying cry for the world to wake up and listen to scientists on climate change. Multi-faith leaders will walk alongside scientists and campaigners, hailing from organisations including Greenpeace and Oxfam Italy, marching to the Vatican to celebrate the pope’s tough stance on environmental issues. The imminent arrival of Klein within the Vatican walls has raised some eyebrows, but the involvement of lay people in church discussions is not without precedent.

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 May 23, 2015  Posted by at 10:31 am Finance Tagged with: , , , , , , , , , , ,  


G. G. Bain Hudson-Fulton celebration. Union League Club. New York. 1909

Our $58 Trillion Love Affair With Debt, In One Crazy Chart (CNBC)
Fed On Track To Hike Rates As Economic Headwinds Wane: Yellen (Reuters)
BRICS To Establish New Multi-Currency Financial Order (RT)
How ‘Mathiness’ Made Me Jaded About Economics (Bloomberg)
Jim Chanos Thinks China Could Be The Next Greece (MarketWatch)
Greece and Creditors Struggle for Elusive Deal (WSJ)
Eurozone Says No Greek Deal Without IMF (FT)
Yanis Varoufakis Is More Than His Clothes (AlJazeera)
How Politics Will Seal The Fate Of Greece (FT)
German Business Morale Weakens And Trade Dampens Q1 Growth (Reuters)
The Strikes Sweeping Germany Are Here To Stay (Guardian)
Bank Of England Secretly Investigates Financial Fallout Of Brexit (Guardian)
GM Inquiry Said to Find Criminal Wrongdoing (NY Times)
Ireland Says Yes To Same-Sex Marriage By Up To 2:1 Margin (Ind.ie)
‘March Against Monsanto’ in 38 Countries, 428 Cities (RT)
Bayer CEO: The World Needs An Antibiotics Bailout (Reuters)
California Accepts Offer By Farmers To Cut Water Usage By 25% (Guardian)
Attacks On The Last Elephants And Rhinos Threaten Entire Ecosystems (Monbiot)
Yet Another Antarctic Ice Mass Is Becoming Destabilized (WaPo)

The one area where the US sees actual growth.

Our $58 Trillion Love Affair With Debt, In One Crazy Chart (CNBC)

Those having a hard time finding growth in the U.S. economy are looking in the wrong places. Forget about real estate, technology or manufacturing: The real American growth industry is debt. While gross domestic product has lingered in the 2 to 2.5% growth range for years, the level of debt as measured through credit market instruments has exploded. As the nation entered the 1980s, there was comparatively little debt—just about $4.3 trillion. That was only about 1.5 times the size of gross GDP. Then a funny thing happened. The gap began to widen during the decade, and then became basically parabolic through the ’90s and into the early part of the 21st century.

Though debt took a brief decline in 2009 as the country limped its way out of the financial crisis, it has climbed again and is now, at $58.7 trillion, 3.3 times the size of GDP and about 13 times what it was in 1980, according to data from the Federal Reserve’s St. Louis branch. (The total debt measure is not to be confused with the $18.2 trillion national debt, which is 102% of GDP and is a subset of the total figure.) Of the total debt, nonfinancial debt leads the way at $41.4 trillion, which breaks down as household and nonprofits holding just shy of $13.5 trillion, nonfinancial business debt at $12 trillion and total government debt at $15.9 trillion.

Growth, such as it is, has been present in all debt categories: In the fourth quarter of 2014, when GDP was growing at just a 2.2% rate, business debt jumped 7.2%, federal government debt surged 5.4% and household debt rose 2.7%, with overall domestic nonfinancial debt up 4.7. So while many economists have bemoaned the 0.2% GDP growth in the first quarter and the dimming prospects for growth the remainder of the year, the debt engine is keeping things humming along—until, of course, the next crisis comes and we start all over again.

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What was it? 0.2% GDP growth in Q1? That can’t be the reason. The Fed made up its mind a long time ago.

Fed On Track To Hike Rates As Economic Headwinds Wane: Yellen (Reuters)

Federal Reserve Chair Janet Yellen was clearer than ever on Friday that the central bank was poised to raise interest rates this year, as the U.S. economy was set to bounce back from an early-year slump and as headwinds at home and abroad waned. Yellen spoke amid growing concern at the Fed about volatility in financial markets once it begins to raise rates, and a desire to begin coaxing skeptical investors toward accepting the inevitable: that a 6-1/2-year stretch of near-zero interest rates would soon end. In a speech to a business group in Providence, Rhode Island, Yellen said she expected the world’s largest economy to strengthen after a slowdown due to “transitory factors” in recent months, and noted that some of the weakness might be due to “statistical noise.”

The confident tone suggested the Fed wants to set the stage as early as possible for its first rate rise in nearly a decade, with Yellen stressing that monetary policy must get out ahead of an economy whose future looks bright. While cautioning that such forecasting is always highly uncertain, and citing room for improvement in the labor market, the Fed chief said delaying a policy tightening until employment and inflation hit the central bank’s targets risked overheating the economy. “For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target,” and begin normalizing monetary policy, Yellen told the Providence Chamber of Commerce.

In a speech in March, Yellen said only that a rate hike “may well be warranted later this year,” though the Fed was at the time giving “serious consideration” to making the move. Investors globally are attempting to predict when the Fed will modestly tighten policy. Most economists point to September, while traders in futures markets held firm on December. Ahead of a three-day U.S. holiday weekend, Treasury yields hit session highs after Yellen spoke on Friday, and short-term interest rate futures extended losses, hitting session lows. U.S. stocks were largely flat. “This is probably the most telegraphed Fed lift-off in some time,” said Bruce Zaro at Bolton Global. “I think they’re concerned about the market’s reaction – they don’t want to have a period of volatility that causes the market to react in a crash-type form.”

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At some point it will reach critical mass.

BRICS To Establish New Multi-Currency Financial Order (RT)

The new BRICS initiatives break the monopoly of existing western institutions over the financial order – a very important symbolic change, as it’s the first time a global financial institution is led by developing countries, said experts to RT. “If the new development bank experiment succeeds, it will show the world that the emerging countries can do and manage a multilateral economic institution by themselves,” Akshay Mathur, geo-economic fellow head of research at the Indian Council on Global Relations, told RT at the BRICS academic forum. While talking about the bank’s challenge to western-dominated financial system, he said that one of its goals is to stimulate lending to countries in local currencies for the new projects in that region.

“Right now the bank has clauses in its charter to encourage lending in local currencies. It can do it for lending in the new projects in the East, for Russian projects in the ruble,” he said. BRICS has already employed tools to move away from US dollar dominance, believes H.H.S. Viswanathan, Distinguished Fellow at India’s Observer Research Foundation. “A lot of trade between China and Russia is already taking place in local currencies. As far as India is concerned, it’s not that advanced, but in some areas – yes, we are using local currencies,” he said adding that the main advantage of the banks’ moving away from the dollar is that trading in local currencies reduces the operational cost.

Akshay Mathur also pointed out the potential risks the bank may face, cautioning that China, the largest of the five BRICS economies, could end up dominating the new financial institution. China has already shown notable success in internationalizing yuan. It is issuing foreign loans in its national currency and has currency swaps with 21 countries. “China is lending now more than the World Bank and the IMF combined in Africa and Latin America. So, what I mean about the risk of Chinese financial architecture is that we want to move to a more multilateral multi-currency equitable architecture, because now we have been moving from the risks of one currency to the risks of another,” he said.

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“..math is central to everything that economists do. But the way math is used in macroeconomics isn’t the same as in the hard sciences..”

How ‘Mathiness’ Made Me Jaded About Economics (Bloomberg)

Economics has a lot of math. In no other subject except mathematics itself will you see so many proofs and theorems. Some branches of econ, such as game theory, could legitimately be housed in university math departments. But even in fields such as macroeconomics, which ostensibly deal with real-world phenomena, math is central to everything that economists do. But the way math is used in macroeconomics isn’t the same as in the hard sciences. This isn’t something that most non-economists realize, so I think I had better explain.

In physics, if you write down an equation, you expect the variables to correspond to real things that you can measure and predict. For example, if you write down an equation for the path of a cannonball, you would expect that equation to let you know how to aim your cannon in order to actually hit something. This close correspondence between math and reality is what allowed us to land spacecraft on the moon. It also allowed engineers to build your computer, your car and most of the things you use. Some economics is the same way, especially in microeconomics, or the study of individuals’ actions — you can predict which kind of auction will fetch the highest prices, or how many people will ride a train. But macroeconomics, which looks at the broad economy, is different.

Most of the equations in the models aren’t supported by evidence. For example, something called the consumption euler equation is at the core of almost every modern macroeconomic model. It specifies a relationship between consumption growth and interest rates. But when researchers looked at real data on consumption growth and interest rates, they found that the equation gives exactly the wrong predictions! Yet it continues to be used as the core of almost every macro model. If you read the macro literature, you see that almost every famous, respected paper is chock full of these sort of equations that don’t match reality. This paper predicts that everyone will hold the same amount of cash. This paper predicts that people buy financial assets that only pay off if people are able to change the wage that they ask to receive.

These and many other mathematical statements don’t remotely correspond to observable reality, nor do they have any evidence in support of them. Yet they are thrown into big multi-equation models, and those models are then judged only on how well they fit the aggregate data (which usually isn’t very well). That whole approach would never fly in engineering. Engineering is something you expect to work. But macroeconomists often treat their models as simply ways, in the words of David Andolfatto, vice president of the Federal Reserve Bank of St. Louis, to “organize our thinking” about the world. In other words, macroeconomists use math to make their thoughts concrete, to persuade others, and to check the internal consistency of their (sometimes preposterous) ideas, but not to actually predict things in the real world.

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So do I: .

Jim Chanos Thinks China Could Be The Next Greece (MarketWatch)

China could be the next Greece and its debt woes may even exceed the European country’s in the next few years, predicts prominent hedge-fund manager Jim Chanos of Kynikos Associates. “I joke to my Chinese friends, somewhat half-seriously, another three-four years they are going to be like my homeland Greece,” said Chanos in an interview, which will air this weekend on Wall Street Week, a show hosted by Anthony Scaramucci, co founder of investment-management firm SkyBridge Capital. The perennial China bear pointed to China’s debt-to-GDP ratio of nearly 300% and projected that the ratio is likely to balloon to 400% over the next few years. Here’s an excerpt from the interview:

“The problem is the credit story,” Chanos said. “China’s banking system is bloated and it’s basically taking on more and more leverage.” Chanos declined to elaborate further when contacted for comments but he has been an unabashed critic of China’s debt-fueled economic growth and has been sounding alarm bells of possible hard landing for the world’s second largest economy for several years. A so-called hard landing can refer to a rapid economic slowdown that occurs typically as a government’s central bank is attempting to tighten fiscal policy and combat inflation. China’s total debt hit $28.2 trillion in 2014, equivalent to 280% of its gross domestic product, according to The Wall Street Journal. Chinese monetary officials earlier this month lowered interest rates to combat a worse-than-expected economic slowdown as companies and governments struggled under heavy debt. China’s GDP rose 7% in the first quarter, slowing from the 7.3% growth in the fourth quarter, the National Bureau of Statistics said in April.

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As I predicted, the June 5 date is no longer a stumbling block. The 16th looks darker, though.

Greece and Creditors Struggle for Elusive Deal (WSJ)

Greece and its lenders are casting around for ways to prevent the country from defaulting on debts to the International Monetary Fund in June, as negotiations to unlock bailout aid barely inch forward and the Athens government runs dangerously low on cash. Greece needs financial help in some form by mid-June in order to repay a series of IMF loans falling due, several officials from the country and its creditors said. The Greek government is expected to be able to cover pensions and public-sector wages in May, and it can probably scrape together enough cash to repay a €300 million IMF loan on June 5, these people said.

But three subsequent IMF payments totaling €1.25 billion due in mid-June pose a severe challenge to Athens’s bare treasury, the officials say, and could force the government to either take politically costly measures such as raiding pension funds or delay the payments and risk an unpredictable fallout at home and abroad. Missing an IMF payment would signal that Athens’s coffers are empty. That could spark heavy deposit withdrawals from Greek banks and force capital controls, deepening the country’s economic crisis, said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington.

The looming IMF payments are putting massive pressure on the government, led by the left-wing Syriza party, to agree by early June to the economic-overhaul demands of its creditors. The IMF itself, which is withholding fresh loans pending a deal on policy measures, wants tough pension cutbacks and labor deregulation, without which it believes Greece can’t achieve sustainable growth or solvency. Those measures are anathema to Syriza, elected in January on an antiausterity platform, leaving Greek Prime Minister Alexis Tsipras faced with only unappealing options. Signing the creditors’ terms and putting them to parliament could split his party. A referendum or elections would need time, which is fast running out, and could trigger uncertainty, bank runs and capital controls.

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The White House will be needed to get the IMF in line.

Eurozone Says No Greek Deal Without IMF (FT)

European leaders have told Greece there will be no deal to release desperately needed bailout aid without approval from the more hardline IMF, setting up a stand-off that could leave cash-strapped Athens without funds well into June. The message, delivered by Angela Merkel, the German chancellor, to Alexis Tsipras, her Greek counterpart, at a private meeting in Riga, Latvia’s capital, as well as by lower-level European officials to their Greek interlocutors, comes as the IMF has been weighing whether to withhold its €3.6bn portion of the €7.2bn bailout tranche Athens needs to avoid default. Eurozone and Greek negotiators have been pushing to complete a deal by the end of the month to free up bailout funds before the first in a series of loan repayments owed the IMF totalling €1.5bn falls due June 5.

But securing IMF approval for a bailout deal significantly complicates that timeline. IMF officials believe Mr Tsipras’s government has reversed many of the economic reforms the IMF had agreed with previous Greek governments and do not feel Athens will be able to hit budget targets that would allow its growing debt pile to be reduced quickly. IMF staff have told their board they would not disburse aid without a “comprehensive” deal that started to lower debt levels. They also want EU assurances that Greece will be able to pay its bills for the next 12 months, a demand that could require eurozone governments to commit to another bailout programme. “It has to be a comprehensive approach, not a quick and dirty job,” Christine Lagarde, IMF chief, said at an event in Rio de Janeiro on Friday..

Greek officials have told their eurozone counterparts they are worried about the IMF’s hardline stance and have argued their conditions are politically undeliverable, especially when it comes to the pension reforms, which remain the biggest stumbling block. The IMF has clashed with the European Commission over how tough a line to take, with the commission going so far as to moot cutting the IMF out of a deal. But German officials have bristled at the commission’s interventions and have made clear all three bailout monitors — the IMF, the commission and the ECB — must approve any deal. “The deal must be concluded with the three institutions,” Ms Merkel said at a gathering of leaders from the EU and former Soviet states on Friday. “There is very, very intensive work to be done.”

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“..when close to a solution, the EU goes back to the table with demands that make no sense in the current context..”

Yanis Varoufakis Is More Than His Clothes (AlJazeera)

As the media picked apart Varoufakis, from his smirk to his casual footwear, ugly stereotypes about Greeks resurfaced. In a German daily, the reporter wrote that while “the other finance ministers looked pale and tired, Varoufakis looked as if he had just come back from vacation.” The fallacy of hardworking northerners and lazy southerners should have been put to rest with the 20th century but is still around in 2015. The press briefings cited in most media — which come almost exclusively from unofficial, anonymous sources — said that the discussions that took place over the past few months were no better. They spoke of Greece having no viable proposals and of living in an alternative reality.

They accused Varoufakis of being an ideologue, as though German Chancellor Angela Merkel’s notion of “expansionary contraction,” which was used to justify the austerity dogma, wasn’t in and of itself an ideological intervention (let alone a contradiction in terms). They even complained that Varoufakis was lecturing them on macroeconomics. He was, in a way. “One of the great ironies of the Eurogroup is that there is no macroeconomic discussion. It’s all rules based, as if the rules are God given and as if the rules can go against the rules of macroeconomics,” Varoufakis said in The Irish Times, in response to a criticism by Ireland’s finance minister that he was “too theoretical.”

For now, Varoufakis, like Greece, enjoys too much unwanted attention. While support for Syriza is growing and the party is now leading with 21 percentage points over New Democracy, everyone from everyday supporters of the party (as recent polls have shown) to Greek businesses agrees that the negotiations have gone on too long. But it’s also becoming obvious that when close to a solution, the EU goes back to the table with demands that make no sense in the current context. Earlier this week The Wall Street Journal reported that German Finance Minister Wolfgang Schäuble “showed no willingness to compromise in the negotiations to unlock the final installment of Greece’s €245 billion bailout.”

And in late-night talks on Thursday, Greek Prime Minister Alexis Tsipras met with his counterparts from France and Germany; the atmosphere, Bloomberg reported, was convivial, but the team failed to reach an agreement to release additional bailout funds. We’re running out of time, as we’re only a few weeks before Greece is forced to default on billions of euros in debt repayments. Europe and the international media should stop talking about its finance minister’s clothes and address his nation’s needs and the ideas that he is putting on the table.

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Wait, who said that before? “The Greek crisis was always as much about politics as economics. Now it is all about politics.” I sure didn’t use the same ‘logic’, however: Greece Is Now Just A Political Issue .

How Politics Will Seal The Fate Of Greece (FT)

Forget debt ratios, fiscal balances, liquidity crunches and the rest. The EU and IMF technicians negotiating with Athens are going through the motions. The Greek crisis was always as much about politics as economics. Now it is all about politics. There are two theories of the Syriza government led by Alexis Tsipras. One presents a cast of bungling amateurs who have spent the past several months digging Greece into an ever deeper economic hole — all the while squandering the trust and goodwill of its eurozone partners. The other says the antics of Yanis Varoufakis, finance minister, are an elaborate political charade calculated to set Greece free from the shackles of merciless creditors.

The first hypothesis is the most popular. The preening and pirouetting, the interviews in glossy magazines, the undergraduate Marxism and love of the limelight — all point to a colossal failure on Mr Varoufakis’s part to grasp the depth of Greece’s plight or the sensitivities of its European partners. Along the way, tens of billions of dollars have drained from Greek banks as citizens stash their savings elsewhere. The conspiracy theory, though, also has its adherents. They start with the assumption that no one could be quite as witless as Syriza has often seemed. Mr Tsipras’s government knew from the outset that it could not reconcile its domestic promises with Greece’s international obligations.

The problem was that Greeks had voted at once for an end to austerity and to stay in the euro. A crisis had to be manufactured to show the government’s hand had been forced. By the Germans, of course. I lean towards the former theory, but it hardly matters. Even at this late hour it would be unwise to say that a deal with creditors is absolutely impossible. High-stakes politics occasionally demands that pigs are seen to fly. What strikes me, though, is how far the conversation in other capitals has moved on. The risk of contagion in the rest of the eurozone has long been discussed. The talk now is about the chaos that would descend on Greece after default and euro exit. Would it be manageable or would the EU be left with a failed state?

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More ‘logic’: “..in view of the long recovery the German economy already has behind it, it was normal that its growth rate would be weaker than the rest of the euro zone..”

German Business Morale Weakens And Trade Dampens Q1 Growth (Reuters)

German business morale deteriorated slightly in May for the first time in seven months though it remained at a high level overall, a leading survey showed, adding to signs of softening in Europe’s largest economy. Although growth levels remain decent, separate data published on Friday showed the slowing of the German economy during the first quarter was down to a drag from foreign trade, which had propelled the economy for much of the past decade. The Munich-based Ifo think tank said its business climate index, based on a monthly survey of 7,000 firms, edged down to 108.5 in May from 108.6 in April. That was slightly above the Reuters consensus forecast for 108.3, sending the euro to a day’s high against the dollar.

It comes after ZEW’s survey this week showed investor sentiment weakening and a purchasing managers’ survey (PMI) showed private sector expansion slowing. “With today’s GDP data, yesterday’s PMIs and now the Ifo, new doubts about the strength of the German economy could emerge again,” said Carsten Brzeski, economist at ING. “Germany is at the end of a very positive reform-growth cycle, which is artificially extended by external tailwinds,” he said, adding that in view of the long recovery the German economy already has behind it, it was normal that its growth rate would be weaker than the rest of the euro zone. The Ifo survey showed companies were more optimistic about the current situation than at any point since June 2014 but they became slightly more pessimistic about their future prospects.

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Germany is not used to inequality.

The Strikes Sweeping Germany Are Here To Stay (Guardian)

German strikes once seemed like German jokes: a contradiction in terms. But no more: this year, Europe’s largest economy is on course to set a new record for industrial action, with everyone from train drivers, kindergarten and nursery teachers and post office workers staging walkouts recently. The strike wave is more than a conjunctural blip: it is another facet of the inexorable disintegration of what used to be the “German model”. Good economic conditions play a part, but unions in the thriving export industries are not the ones that are striking these days. Strikes cluster in domestic services, especially the public sector, and indications are that they are here to stay.

In the old days, the powerful unions of the metalworkers set the pace for wage increases throughout the economy. But the last time IG Metall went on a nationwide strike was in 1984. In the 1990s, its members, in particular those in the large car factories, learned the hard way that manufacturing jobs could more easily than ever be moved abroad, to China or the formerly communist eastern Europe. International competition is now no longer just about market share, but also employment. It did not take long for the union leadership to notice this. Fear of unemployment, incidentally, accounts also for German manufacturing workers’ unwillingness to contribute to macroeconomic balance under European monetary union by pushing for higher wages in order to bring down the German export surplus.

Today, the action has shifted to services, where job export is more difficult. But other factors also account for the rise of industrial disorder. Since unification, public employers, in pursuit of fiscal consolidation, have broken up Germany’s peculiar public sector collective bargaining regime, which covered everyone from refuse collectors to professors and generated, essentially, the same yearly wage increases for all. Moreover, several occupations – including train drivers, teachers and postal workers – lost the uniquely German employment status of Beamter, of civil servants without a right to strike but with lifelong tenure and guaranteed pay raises in line with the rate of economic growth.

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How is this a big story? Of course the BoE studies Brexit.

Bank Of England Secretly Investigates Financial Fallout Of Brexit (Guardian)

Bank of England officials are secretly researching the financial shocks that could hit Britain if there is a vote to leave the European Union in the forthcoming referendum. The Bank blew its cover on Friday when it accidentally emailed details of the project – including how the bank intended to fend off any inquiries about its work – direct to the Guardian. According to the confidential email, the press and most staff in Threadneedle Street must be kept in the dark about the work underway, which has been dubbed Project Bookend. It spells out that if anyone asks about the project, the taskforce must say the investigation has nothing to do with the referendum, saying only that staff are involved in examining “a broad range of European economic issues” that concern the Bank.

The revelation is likely to embarrass the bank governor, Mark Carney, who has overhauled the central bank’s operations and promised greater transparency over its decision-making. MPs are now likely to ask whether the Bank intended to inform parliament that a major review of Britain’s prospects outside the EU was being undertaken by the institution that acts as the UK’s main financial regulator. Carney is also likely to come under pressure within the Bank to reveal whether there are other undercover projects underway.

Officials are likely to have kept the project under wraps to avoid entering the highly charged debate around the EU referendum, which has jumped to the top of the political agenda since the Conservatives secured an overall majority. Many business leaders and pro-EU campaigners have warned that “Brexit” would hit British exports and damage the standing of the City of London.

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More cooperative criminals?!

GM Inquiry Said to Find Criminal Wrongdoing (NY Times)

Justice Department investigators have identified criminal wrongdoing in General Motors’ failure to disclose a defect tied to at least 104 deaths, and are negotiating what is expected to be a record penalty, according to people briefed on the inquiry. A settlement could be reached as soon as this summer. The final number is still being negotiated, but it is expected to eclipse the $1.2 billion paid last year by Toyota for concealing unintended acceleration problems in its vehicles, said the people, who did not want to be identified because the negotiations weren’t complete. GM’s eagerness to resolve the investigation – a strategy that sets it apart from Toyota, which fought prosecutors – is expected to earn it so-called cooperation credit, one of the people said.

That credit could translate into a somewhat smaller penalty than if GM had declined to cooperate. Former GM employees, some of whom were dismissed last year, are under investigation as well and could face criminal charges. Prosecutors and GM are also still negotiating what misconduct the company would admit to. For more than a year, federal prosecutors in Manhattan and the F.B.I. have homed in on whether the company failed to comply with laws requiring timely disclosure of vehicle defects and misled federal regulators about the extent of the problems, the people who were briefed on the inquiry said. The authorities also examined whether GM committed fraud during its bankruptcy proceedings in 2009 by not disclosing the defect.

An agreement with the Justice Department, which could still fall apart, would represent a crucial step as GM tries to move past a scandal-laden year that tainted its reputation for quality and safety and damaged its bottom line. “We are cooperating fully with all requests,” the automaker said in a statement. “We are unable to comment on the status of the investigation, including timing.” In February 2014, the automaker began recalling 2.6 million Chevrolet Cobalts and other small cars with faulty ignitions that could unexpectedly turn off the engine, disabling power steering, power brakes and the airbags. The switch crisis prompted a wave of additional recalls by GM for various safety issues. All told, GM recalled more than 30 million vehicles worldwide last year – a record for the automaker.

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Is there any other choice?

Ireland Says Yes To Same-Sex Marriage By Up To 2:1 Margin (Ind.ie)

The same-sex marriage referendum will be comfortably passed, based on early tallies from across the country. The margin of victory is tipped to be heading towards a 2:1 majority. The high turnout favoured Yes campaigners as the efforts to get the vote out worked effectively, particularly among young voters. Few, if any locations, are showing a No vote winning the referendum. Even in traditionally conservative rural area, the vote is coming in at 50:50. Dublin will be strongly Yes, right across the city and county. But this trend is being matched in locations across the country.

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“Monsanto is a monopoly, and it’s acting like one. It’s basically controlling 90% of the seed market in the United States..”

‘March Against Monsanto’ in 38 Countries, 428 Cities (RT)

Hundreds of thousands of demonstrators in 428 cities are expected to turn out this weekend to protest agribusiness giant Monsanto. The third annual ‘March Against Monsanto’ seeks to highlight the company’s part in control of the food supply. The worldwide protest scheduled for May 23 is a continuation of growing awareness and opposition to industrial agriculture’s increasing consolidation of farming resources and methods, according to organizers. In 2013, the first March Against Monsanto garnered more than 2 million protesters in 436 cities across the world, according to a previous report by RT. Similar numbers were reported for last year’s demonstrations.

Monsanto’s track record has been scrutinized ever since it aided US warfare during the Vietnam war. Agent Orange was manufactured for the US Department of Defense primarily by Monsanto Corporation, the use of which is estimated to have killed and maimed around 400,000 while causing birth defects for 500,000 children. Scientific studies have linked the chemicals in Monsanto’s biocides to Parkinson’s disease, Alzheimer’s disease, autism, and cancer. “People are fed up. We should break up Monsanto,” Adam Eidinger of Occupy Monsanto told RT. “Monsanto is a monopoly, and it’s acting like one. It’s basically controlling 90% of the seed market in the United States. We wouldn’t let one cell phone company control 90% of the cell phones. But for some reason we let food be controlled.”

As the most powerful multinational biotech corporation today, Monsanto has drawn the ire of those within the movement for its firm grip on the global food chain. The company’s control and advancement of genetically modified organism (GMO) seeds is of prime concern. “In polls conducted by the New York Times, Washington Post, Consumer Reports, and many others, over 90% of respondents were in support of national GMO labeling – an initiative that has been defeated time and time again at the state level thanks to heavy spending by Monsanto-backed lobbying groups,” wrote March Against Monsanto in a news release.

Amid a wave of concern over genetically engineered foods sweeping through the US and around the world, major agribusiness and biotechnology conglomerates like Monsanto have spent immense amounts of cash to cloud the ‘right-to-know’ movement in the US. According to the Center for Food Safety, dozens of US states have in recent years considered labeling legislation and ballot initiatives while a handful have passed laws mandating GMO transparency. Vermont’s governor signed the nation’s first clean GMO-labeling requirement into law in 2014, to take effect in 2016, but a coalition of biotech firms filed a lawsuit to prevent that from happening. Other states have passed labeling laws, but with strings attached.

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These are the people who are instrumental in creating the problem, and now want us to pay them for a solution.

Bayer CEO: The World Needs An Antibiotics Bailout (Reuters)

German drugmaker Bayer expects the world’s largest economies to pool billions of euros in funding for the development of antibiotics against the growing threat of drug-resistant superbugs, its chief executive said on Friday. “I expect a multinational fund for antibiotics research. One country alone can’t shoulder it,” CEO Marijn Dekkers told Germany’s Der Spiegel magazine, according to an excerpt of an interview provided to Reuters on Friday. The funds were expected to be pledged during the June summit of the Group of Seven (G7) wealthy nations in Germany, he was quoted as saying. He mentioned reports that four new antibiotics would cost $22.4 billion to develop, saying that was “maybe a bit too much, but it will be really expensive”.

The World Health Organization has deemed the rising tide of drug-resistant bacteria, or so-called superbugs, as the “single greatest challenge in infectious diseases”. Germany’s health ministry has said Berlin would seek to address drug-resistant superbugs as part of the country’s presidency of the G7, leading up to the G7 summit in Bavaria in June. Governments should award development contracts for more antibiotics to pharmaceuticals companies, modelled on development contracts tendered to the defence industry, Dekkers told Der Spiegel. The pharma industry has argued that the private sector was being deterred from funding the development of new antibiotics because, to prevent the emergence of even more resistant bacteria, they would only be used when existing therapies have failed.

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A frist step. But nobody knows if it will be enough.

California Accepts Offer By Farmers To Cut Water Usage By 25% (Guardian)

California’s drought has produced a plot twist too singular even for Chinatown: farmers volunteering to give up a quarter of their water. Scores of farmers in the delta of the Sacramento and San Joaquin rivers made the unprecedented offer on Friday in a deal to stave off even steeper mandatory cuts. Agricultural players have fiercely guarded their water rights since the 19th century, rebuffing competing claims from cities and other rivals in the so-called water wars, a web of intrigues immortalised in Roman Polanski’s Chinatown. The film’s fictional farmers never countenanced voluntarily cutting their water use but as California endures a fourth year of drought growers in the delta calculated it was the lesser evil.

By promising to forfeit a quarter of this season’s water – by fallowing land or finding other measures to cut usage – they have averted harsher restrictions from state authorities. The State Water Board had warned it was days away from ordering some of the first cuts in more than 30 years to senior water rights holders. “This proposal helps delta growers manage the risk of potentially deeper curtailment, while ensuring significant water conservation efforts in this fourth year of drought,” State Water Board chair Felicia Marcus said in a statement.

“It allows participating growers to share in the sacrifice that people throughout the state are facing because of the severe drought, while protecting their economic well-being by giving them some certainty regarding exercise of the State Water Board’s enforcement discretion at the beginning of the planting season.” The agreement applies only to so-called riparian rights holders – farmers with direct access to streams. Those who participate can opt to reduce water diversions from streams by 25%, or fallow 25% of their land. In both cases, the reductions will be from 2013 levels.

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They threaten my mental sanity, too.

Attacks On The Last Elephants And Rhinos Threaten Entire Ecosystems (Monbiot)

Until 2008, conservationists, in some places at least, appeared to be winning. But in that year the number of rhinos killed in South Africa rose (from 13 in 2007) to 83. By 2011, the horrible tally had risen to 448. It climbed to 668 in 2012, 1004 in 2013 and 1215 in 2014. In the first four months of this year, 393 rhinos have been killed there, which is 18% more than in the same period last year. The reasons for this acceleration in the Great Global Polishing are complex and not always easy to tease out. But they appear to be connected to rising prosperity in Vietnam, the exhaustion of illegal stocks held by Chinese doctors and, possibly, speculative investment in a scarce and tangible asset during the financial crisis. Corruption and judicial failure help to keep the trade alive.

Already, the western black rhino is extinct (the declaration was made in 2011). The northern white rhino has been reduced to five animals: a male at the end of its anticipated lifespan and four females, scattered between Kenya, the US and the Czech Republic. Similar stories can be told about some populations of elephants – in particular the forest elephants of west and central Africa. It’s not just these wonderful, enchanting creatures that are destroyed by poaching, but also many of the living processes of the places they inhabit. Elephants and rhinos are ecological engineers, creating conditions that hundreds of other species have evolved to exploit. As the paper in Science Advances notes, the great beasts maintain a constantly shifting mosaic of habitats through a cycle of browsing and toppling and trampling, followed by the regrowth of the trees and the other plants they eat.

They open up glades for other herbivores, and spaces in which predators can hunt. They spread the seeds of trees that have no other means of dispersal (other animals are too small to swallow the seeds whole, and grind them up). Many trees in Africa and Asia are distributed exclusively by megaherbivores. They transport nutrients from rich places to poor ones and in some places reduce the likelihood of major bushfires, by creating firebreaks and eating twigs and leaves that would otherwise accumulate as potential fuel on the ground. Many animal species have co-evolved with them: the birds that eat their ectoparasites, the fish that feed on hippos’ fighting wounds (some of these species, I believe, are now used for fish pedicures), the wide range of life that depends on their dung for food and moisture, on their wallows for habitats, on the fissures they create in trees for nesting holes.

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Crumbling stability all around.

Yet Another Antarctic Ice Mass Is Becoming Destabilized (WaPo)

The troubling news continues this week for the Antarctic peninsula region, which juts out from the icy continent. Last week, scientists documented threats to the Larsen C and the remainder of the Larsen B ice shelf (most of which collapsed in 2002). The remnant of Larsen B, NASA researchers said, may not last past 2020. And as for Larsen C, the Scotland-sized ice shelf could also be at potentially “imminent risk” due to a rift across its mass that is growing in size (though it appears more stable than the remainder of Larsen B). And the staccato of May melt news isn’t over, it seems.

Thursday in Science, researchers from the University of Bristol in Britain, along with researchers from Germany, France and the Netherlands, reported on the retreat of a suite of glaciers farther south from Larsen B and C along the Bellingshausen Sea, in a region known as the Southern Antarctic Peninsula. Using satellite based and gravity measurements, the research team found that “a major portion of the region has, since 2009, destabilized” and accounts for “a major fraction of Antarctica’s contribution to rising sea level.” The likely cause of the change, they say, is warmer waters reaching the base of mostly submerged ice shelves that hold back larger glaciers — melting them from below.

This has been a common theme in Antarctica recently — a similar mechanism has been postulated for melting of ice shelves in nearby West Antarctica (which contains vastly more ice, and more potential sea level rise, than does the Antarctic peninsula). “This is one of now three really quite substantial signals that we’ve seen from different parts of West Antarctica and the Antarctic peninsula that is all going in the same way,” said Jonathan Bamber of the University of Bristol, one of the paper’s authors. The other two are the losses of ice in the Larsen ice shelf region — where glaciers have sped up their seaward lurches following past ice shelf collapses — and in West Antarctica.

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